Even if your credit is OK, your income is enough to qualify and you have put a down payment down that works for the mortgage program, you can still be denied a mortgage. Sometimes the reason for denial is something that was avoidable, and good advice and structure could have mitigated the issue. But sometimes there is something else that comes up, sometimes unexpected, that can trigger a denial for a mortgage loan. Here are eight ways to get your mortgage denied…accidently!

1. 1. The rate you were hoping for is not available when you are ready to lock in your loan: if you were pre-approved at the lowest rates available, but when you find a home the market moved and now the rates are higher. Another scenario is that you applied for your loan, but since you weren’t closing for a long time you did not lock in your rate, and now the file may not work. And lastly, you and your mortgage professional decided not to lock in, gambling that rates will go down, and that didn’t happen.
2. 2. You apply for the loan and your lender based the approval on the credit report in the file. Unbeknownst to you, a credit refresh, which is a new credit report without scores, is pulled within 10 days of closing. You were so excited about the new house that you went shopping and you charged your credit cards up, and now you don’t qualify. Or maybe you upgraded your car because your lease needed to be turned in, and now the payment is higher. Another problem that can come up with the credit refresh is a new late payment. If the late is on a mortgage the loan can be denied, or if there are multiple lates an underwriter may use this as a reason to reverse an approved loan.
3. 3. Everything is going well. You are so excited about the house. Your contract says you need to put 20 percent down, but your grandmother ended up giving you less of a gift than you thought she was going to give you. You apply for a 10-percent-down loan. No big deal, you feel. The problem is that your ratios are too high and you cannot get PMI (private mortgage insurance). You realize that the house is just too expensive anyway since your grandmother is not helping you. You provide the denial to your attorney, who gives it to the seller’s attorney. Since you never applied for the 20-percent-down loan as stipulated in your contract, the seller keeps your down payment. Ouch!
4. 4. You make $120,000 a year. You provided your last paystub to the mortgage lender. Everything is checking out. You explain that you recently got a raise. You provided a letter from the company that you were not an owner of the company. What you didn’t tell them is that you work for your uncle. And that your income went from $40,000 a year to $120,000 a year just last month. Since you work for family and your income level is not similar to what you have earned in the past, as per mortgage guidelines your loan can be denied.
5. 5. You are in contract to purchase an investment property. You are putting 25 percent down. What you omitted was that the down payment was a gift. On investment property mortgage, no gift is allowed. Since you received the money two days before the down payment check cleared your account, the loan will be denied. The same is true for any file where the down payment comes from an unverifiable source, like cash, green cash, gemach funds, loans etc…
6. 6. Your employer checks a box on a written verification of employment stating overtime/bonus is not likely to continue. $25,000 of your income is overtime. The loan may not qualify.
7. 7. You are working for a yeshiva and they pay your kids’ tuition and deduct insurance from your salary. You don’t qualify based on this lower salary.
8. 8. You move into the property before the closing. The loan type is FHA, 3.5 percent down payment. The lender finds out. If this happens, you either have to wait four months to close or put 15 percent down.

I can put together another 15 such scenarios. Every scenario listed above can be avoided. That is why using an experienced mortgage loan originator is the key to a successful mortgage closing. If you or anyone you know is experiencing any of the situations listed above, reach out to my office to help you restructure your loan application.

Yael Ishakis, NMLS ID# 9879, has been helping families finance their homes for over 17 years. Yael is the branch manager at FM Home Loans located on 568 Cedar Lane and can be reached at 201-215-0080. Yael is an avid reader and a mother of five, and loves being busy all the time.

By Yael Ishakis