If your application for a Texas mortgage was denied it can be frustrating, insulting, and nerve wracking. But don’t despair – a mortgage denial does not need to be the end of your home ownership dreams or hopes to refinance. There are several reasons why a loan application can be denied and the most important first step is to find out as best you can why yours was not approved.
The loan consultant you were working with should be able to tell you whether the issue was credit history, debt to income ratio, loan to value ratio, or something else. In some cases you may qualify by lowering your loan amount either by borrowing less in a refinance or by finding a less expensive home to buy. In a purchase scenario it never hurts to ask the seller to reduce their price before allowing the contract to fall through.
If a lower loan amount is not an option you may qualify for a different Texas loan program than the one you originally applied for. If for example you were denied for a program which requires that you have 20% equity because your appraisal came in low, perhaps an FHA loan could work for you. FHA financing allows you to borrow much more of your home’s value than many conventional programs.
Perhaps your mortgage application uncovered a blemished credit history. Again – you may wish to consider an FHA or other government loan program, which often have lower credit score requirements.
Should you still not qualify for a mortgage after considering alternate programs there are several steps you can take to improve your credit worthiness. First, pay every bill on time, and work to pay down debt to improve your credit score (but don’t close any accounts as you pay them off as the history of those accounts will help your credit picture.) Build up your savings so that you can show you have a healthy amount in “reserves”, or available to pay a few months of expenses should you have an unexpected interruption in income.
To learn more about the loan programs discussed here give us a call at 972-591-3097.