Applying for a mortgage seems simple enough. You fill out an applicationà submit à get approved. But what happens if the application doesn’t get approved? You’re probably wondering what went wrong. Let’s talk about what are some things to look out for that can cause the bank to deny the mortgage approval:
Inconsistencies in the mortgage application
The mortgage application needs to reflect an accurate representation of the borrower and their financial circumstances. Sometimes borrowers make mistakes on their mortgage application that leads to inconsistencies. When underwriters find one too many mistakes or inconsistencies in the mortgage application, they can become uncomfortable engaging with the borrower. Sometimes explanations can help overcome these challenges, but it’s always best to make a good first impression.
Misunderstanding of the bank’s approval guidelines
Before applying to a specific bank or lender, it is important to understand their internal guidelines and lending preferences. This is where mortgage brokers shine because it’s our job to understand these guidelines across various lenders so that we can best match the borrowers to the appropriate mortgage solutions available. If you submit an application that is outside a specific bank’s guidelines, then the application was doomed from the start. Once again, this can be avoided with an experienced mortgage broker…
Supporting documentation
It is important to understand that the mortgage application is a “self-report”. In other words, the information that is input into the application is done so by the borrower. However, the banks will want you to support the information wherever possible. This is especially true for income and down payment conditions. For example, if you say that you earn 100k per year and are salaried. The bank will eventually want you to provide supporting documentation to support that claim. In the same example, if you provide a job letter that states you are a full-time wage worker earning $48/h with a guaranteed 37.5 hours per week, your income works out to ~$94k/year. Depending on the mortgage request, this shortfall could lead to you being disqualified for being able to borrow the desired mortgage. This is why we recommend that you base your mortgage application on the supporting documents and not the other way around…
Subject property
Sometimes the mortgage can simply be denied on the subject property itself. Some of these reasons include:
- Property is outside their preferred lending area
- Type of home is not preferred (i.e., mobile home, seasonal homes, etc.)
- Price of the home is not supported by an independent appraisal
- Home itself has concerns (i.e., damage, previous illegal activities, etc.)
These are just some reasons why banks may deny your mortgage application…as experienced mortgage professionals, we strive to remove any unnecessary barriers that could jeopardize your mortgage approval. This, of course, starts with a thoughtful conversation, before you fill out any mortgage applications…. that way we can guide you on the right track – (905) 455-5005