Applying for a mortgage loan can be a nerve-wracking experience,” says Ruth E. Battle, Senior Vice President of Paramount Mortgage Co. “Even after completing all the paperwork and complying with document requests; the lender rejects the loan. Why does this happen?” Consumers should know their “no.”
Battle says some of the “basic reasons loans are denied include insufficient income, poor credit, inadequate assets and low appraised value.” Over the last few years, rejection reasons have become much more complicated. The reason a consumer can be told “no” may have “more to do with the lender than the consumer.”
For the most part, all lenders follow basic guidelines in the mortgage industry. However, Battle says “individual firms add to those basic guidelines” and that can cause a mortgage to be denied. A great example of this is credit score requirements. The guidebook may say a 620 score is acceptable, but an individual firm can set the bar higher; for example 640.
“No’s” for basic reasons should happen very quickly. A more troubling reason a lender says “no” may have to do with the ability of the loan professional to understand a complicated situation. This could happen late in the process. “No’s” late in the game can cause additional harm, especially if a consumer was initially told “yes.”
There are two scenarios in which this happens; income analysis and condominium loans.
Income Analysis – Self-employed borrowers require accurate calculation of income very early in the mortgage process. If the loan officer or support staff does not know how to get through complicated tax returns or financial statements, a “no” could be the result of ineptness or unwillingness to put in the additional work required to complete the function. An even worse situation is when the lender says “no” very late in the game. Buyers may have already proceeded with a transaction based on an initial OK from the lender.
Condominium Financing – Many loan officers do not have the appropriate training or company resources to approve condominium financing. Condominiums are highly scrutinized. If the leg work is not done upfront or the lender just does not want to deal with it, the result can be a “no” to the consumer. Realtors are a valued and necessary partner in these instances and have market knowledge to easily find out which lenders have the capacity to finance condominium complexes.
What can a borrower do if they are in this spot? “Know the ‘no’,” states Battle, “find out which one of these reasons applies.” If you are not satisfied with the explanation, take it up the food chain. Insist on an understanding. Ask if there may be another company that could accommodate the transaction. It may result in a very happy yes.
St. Louis MORTGAGE INTEREST RATES for June 29, 2011:
- Conventional 30-Year Fixed 4.750%/ 5.125% APR
- Conventional 15-Year Fixed 4.00%/ 4.10% APR
- Conventional 5/1 ARM 3.500%/ 3.277% APR
- FHA/VA 30 Year Fixed 5.000 %/ 5.485% APR
- Jumbo 5/1 ARM 3.250%/ 3.123% APR
- Jumbo 15 yr Fixed 3.750%/ 4.125% APR
- Jumbo 30 yr Fixed 5.125%/ 5.425% APR
*The above mortgage rates are based upon an 80% LTV, o/o single family with FICO scores of 720.
Paramount Mortgage is a locally owned Mortgage Banker; we just celebrated our 40th anniversary. Great rates and programs are secondary to what is most desired in a lender relationship. The most sought-after aspects in this industry cannot be easily translated onto paper…learn more about us here.
For more information or if you have questions on mortgage rates you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
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