Buying a home is one of the most exciting milestones in life. You’ve saved up for the down payment, chosen your dream home, and submitted your mortgage application. But did you know some unexpected factors could cause your lender to deny your mortgage?
This blog will break down five surprising reasons your mortgage might not get approved—and how to avoid these pitfalls so you can confidently secure your loan and move into that new home.
1. Changes in Employment
Switching jobs may feel like a positive step in your career, but doing so right before or during the application process can raise red flags for your lender. Stability is key to getting approved for a mortgage, and changing jobs could make lenders question whether your current income is guaranteed.
How to avoid this issue:
- If possible, wait until after your mortgage is secured to make career moves.
- If a job change is unavoidable, communicate with your lender. Regular income documentation from your new job can sometimes ease their concerns.
2. Taking on New Debt
Applying for a new credit card, buying a car, or financing furniture for your future home may seem harmless. However, any additional debt can increase your debt-to-income (DTI) ratio, a key metric lenders use to determine your eligibility. A high DTI signals financial risk and can be a dealbreaker.
How to avoid this issue:
- Delay any major purchases until after you’re approved for the mortgage.
- Keep your credit utilization low to maintain a healthy credit score.
3. Forgetting to Pay Bills
Even a single late payment on your credit report can hurt your odds of getting approved. Lenders take your credit history seriously, and missed payments signal financial irresponsibility, even if unintentional.
How to avoid this issue:
- Set up automatic bill payments to stay on track.
- Review your credit report regularly for any missed payments or errors that could harm your credit score.
4. Large Unexplained Bank Deposits
A sudden and unexplained influx of money in your bank account might seem harmless, but lenders are required to investigate large deposits. They do this to ensure the money isn’t a loan (which could affect your DTI ratio) or sourced from questionable means.
How to avoid this issue:
- Document all large deposits with paper trails, such as gift letters or proof of sale.
- Consult with your lender before making large transactions to avoid misunderstandings.
5. Overlooking Credit Report Errors
Something as simple as inaccurate information on your credit report could derail your mortgage application. Old debts marked as unpaid, incorrect credit limits, or even fraudulent activity can lower your credit score and hurt your chances of approval.
How to avoid this issue:
- Check your credit report through services like AnnualCreditReport.com at the beginning of your homebuying process.
- Report and dispute any discrepancies with the credit bureau to have them corrected.
Stay Ahead of These Mortgage Pitfalls
Getting a mortgage takes preparation and attention to detail. By avoiding these common yet often unexpected missteps, you’ll be in a stronger position to secure your loan and start the next exciting chapter in your dream home.
Allied Residential Mortgage: The Smart Path to Homeownership
Allied Residential Mortgage is much more than one of the top mortgage brokers. ARM is also a family, with business relationships going back over 25 years.
Our founders cultivated a culture of integrity and collaboration. In the process, they created something special: a family, and we want you to be part of it.
