Purchasing a home is often a complicated, stressful process. To help things along, many first-time home buyers try to get “pre-approved” for a mortgage before finding a property. The problem is, there are still problems that can arise even if someone has been pre-approved.
Today, we cover three of the common issues borrowers encounter when financing their residential real estate purchase:
Employment concerns
When a mortgage underwriter looks at an applicant’s employment history, they want to ensure the applicant has a consistent enough income to make timely payments. Factors that may give them pause include:
- Gaps in employment history
- Recently changing careers
- Layoffs
- Temporary employee status
Lenders also will sometimes overlook bonuses, commissions, or other not guaranteed income.
Issues in credit history
Many mortgage underwriters look at FICO credit scores, which include the last ten years of someone’s credit reports. Consequentially, even if someone currently has a high credit score, something from years past can derail the process. A history of late payments, for example, might make an underwriter reject a loan application.
Appraisals that come in low
If the home you are looking to buy is appraised at a lower value than the purchase price, the underwriter may reject the loan. This typically happens because the value does not match the amount a borrower is asking for. With the help of an experienced professional, applicants can contest a low appraisal.
Consulting with a real estate attorney early in the process can help many people avoid issues in the mortgage application process as well as real estate closings, partition actions and mortgage refinancing.
