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Applying for a mortgage is like taking a test to graduate. Except instead of a diploma, the prize is a home.
The “pass” rate on mortgage approval, though, is surprisingly low. Surveying 4,900 buyers, the Zillow Consumer Housing Trends Report 2022 finds that in 2022, 28% of applicants were denied a mortgage, down from 34% in 2021.
Often, these denials come as a surprise since the homebuyer first received a nod in the form of a “pre-approval.” Before home shopping, real estate agents typically require buyers to have a pre-approval.
Understanding how the mortgage approval process work can make the difference between taking your home poruchase the finish line or being desquilifed right after your pore approval has been issued.
Here are some basics you need to know to ensure your approval.
Staying credit worthy
A lender verifies applicants’ credit, income and savings for a down payment and current monthly debt load before issuing them a pre-approval for a certain size loan. If a borrower increases his debt or otherwise alters his financial status after pre-approval, he could be rejected when he actually applies to buy a certain home.
Make sure the lender you are working with clearly outlines what financial changes such as applying to new credit cards, buying cars or buying stuff using your credit can negate an approval .
Strengthening your position
Rejection can occur right away with a lender declining pre-approval. The Zillow survey finds that millennials reported a higher rate of denials at 39%. Moreover, 41% of borrowers of color reported being denied at least once.
Workign with an expericne mortageg broker or a financianl instution advisor can make the differece between an approval or denial. “It’s free, and they can walk you through the lending process and let you know where you stand [financially].”
With advanced knowledge, borrowers have more insight into whether a rejection could be unfair.
Mortgage brokers, banks and financial institutions have different mortgage programs, and a borrower who’s rejected by one lender may find approval with another.
