You naturally wonder why you were turned down. It is more difficult to get a mortgage today because lenders have tightened the standards they use when deciding who should get a loan. You need to educate yourself about the lending process in order to present yourself in the best possible light to increasingly critical lenders. Read on to discover five reasons bankers decline home loans, and learn how to avoid these problem areas.

1. Too much debt

Financial institutions take a close look at your total debt when deciding whether to give you a mortgage. They prefer that an individual’s housing cost stay at 33 percent of gross income or below. They like to see consumer debt kept under 5 percent of gross income. If your consumer debt, which includes credit card and auto payments, goes over 5 percent, it slices into the 33 percent allocated for housing costs. The higher your consumer debt, the smaller the mortgage you can obtain. Experts agree that those possessing a debt-to-income ratio above 50 percent are courting financial disaster. Take care to keep your credit card debt low by living within your means and your banker will take a more favourable view of your financial record. If you have existing mortgages on other properties you may have to sell a property or spread your exposure out across several financial institutions to secure another mortgage.

2. Changing jobs

Financial institutions look for stability and consistency, especially when it comes to your employment, and changing jobs might make it more difficult for you to obtain a home loan. Lenders prefer to see that you stayed at your job for at least two years. If you have moved to a better-paying job in the same employment area or a similar area, your chances of obtaining a mortgage should not suffer. Be careful, though, if you are thinking of moving to self employment from a salaried position. When you become self employed, you no longer have any degree of salary consistency to demonstrate on your loan application. Lenders are more careful about lending money to self-employed mortgage seekers and employees who rely heavily on sales commissions in their work.

3. Wavering credit score

Several months may elapse between filling out your mortgage application and finalising the loan. Make sure you make all payments on time during the mortgage application period. Your financial institution may make more than one check on your credit during this time. Do not open any more lines of credit. When you take on more debt, you make the lender question your financial stability. Do not apply for credit cards, since credit inquiries will affect your credit score. Before applying for a mortgage, check your credit report, there are many websites that will do this for you for free. If you find errors, report them to the agency in question. Resolution may take several months.

4. Missing mortgage payments

Missing a mortgage payment is a red flag to a mortgage lender, so it is vital that you make all of your major payments while applying for a new home loan. Any payment made 30 days after the due date is considered past due. Financial institutions will regard you as a credit risk if you fail to keep up with your current mortgage. A steady job and low expense ratio may allow you to get conventional financing if you have had just one late payment in the previous 12 months. Make more late payments, though, and financial institutions may turn you away. Discuss any payment problems with your current mortgage holder so that you can work out a solution.

5. Overlooking details

Study every form you encounter during the application process very carefully. Take the time to understand the forms in front of you and what you are filling out on them. Provide only complete and accurate information. Do not leave blank spaces or miss any details. You are seeking to borrow a very large amount of money, so your financial institution wants to know everything about you and your financial history.

Bio

Andrew Potter has been an estate agent for over ten years and regularly contributes articles to the UK finance and real estate arena. Andrew runs My Online Estate Agent one of the fastest growing online estate agents in the UK. My Online Estate Agent provides all the tools and guides you need sell or let a property for a one off fixed fee.

Floods and Earthquakes

One thing that is often overlooked would be the additional coverage when it comes to natural disasters such as earthquakes and floods. For any home that is in an area that may be affected by such disasters, additional policies for endorsements to the contract should be made. Many people do not realize that basic homeowners insurance does not cover such disasters. To discover the best policies see compare the market home insurance. Depending on the size of the property, these additions can vary. Basic disaster coverage may only cover a portion of the home. To ensure the entire property, a more robust policy is needed.

Liability Insurance

Not having enough liability insurance can certainly be problematic. Many people often do not consider this until there is an accident or injury that occurs at the property. One would never think that there would be such a problem but accidents and mistakes can happen. For dog owners, there is always the possibility that the pet could bite or injure someone and this would require paying out a good deal of money for the damages. Because of the unexpected, liability insurance is necessary.

Updated Information

It is important that every homeowner is familiar with every aspect of the home. This includes knowing when things such as the electrical system and the roof were last replaced or updated. Having the correct information for the insurance company will ensure the policy is correct. Also, when improvements for additions are made to the home, the insurance company should be notified. For example, if an addition is put on the home and the insurance company is not notified, this may not be covered in the event of something such as a fire or theft.

Coverage for Valuables

A basic policy may include a lower coverage amount when it comes to valuables such as jewellery, collectibles, antiques and furs. In the event of theft, a very small portion of the replacement cost would be provided. Increasing the coverage amounts on these valuables is usually something that can be added for a very nominal amount of money.

The Right Insurance Agent

Having the best insurance agent will ensure that homeowners will be able to have peace of mind. The right policy at the right price should be provided with a good agent.

It is easy to make mistakes when it comes to purchasing insurance for the home. By looking out for these common mistakes, people can get the proper coverage for their home.

If purchasing a home with a mortgage the lender will require building insurance (it would be compulsory), the benefit it could provide in a rare event when the property may suffer complete or partial structural damage from natural disasters, compensation from an insurance policy can ease significant repair costs. The cost of replacing furniture and furnishings (such as carpets, flooring) and other contents of the house that are damaged in a fire or flood can also be significant, a frightening prospect made bearable with home insurance.

The majority of fires primarily occur in the kitchen due to accidents whilst cooking or electrical equipment wiring failure whilst the room in a home that experiences the second highest proportion of fires is the lounge. The Fire and Rescue services reported total fires in homes to be 56,000 in 2006, a home with a good burglar alarm and secure locks as well as smoke alarms (fire blankets, fire extinguishers) can help reduce the insurance premium paid.

Home insurance can cover every item in your home and mitigate against all possible natural disasters that may impact the home (identifying every plausible situation that may result in loss or damage to the home and property within), this will result in a more expensive premium.

A reputable insurance provider will be able to advise of the best home insurance policy based on the area of the property, the market value of the property, the value of the contents within the property, an understanding of the potential risks associated with the property and other relevant issues.