Even if your finances are perfect, you can be denied a mortgage. Here’s why

You might think that if you have good credit and a solid income, you’ll be sure to get the mortgage you need to buy a home. After all, most mortgage lenders look carefully at your financial credentials to make sure you don’t pose a significant lending risk.

However, even if you are pre-approved and meet the lender’s criteria regarding your finances; yet I can’t get my loan approved. Here’s how that could happen.

Lenders don’t just consider your personal finances

There’s a very simple reason why your impeccable financial credentials don’t necessarily guarantee you a mortgage loan. Because lenders don’t just look. you When deciding whether a loan is too risky to approve. They also look at houses.

See, a mortgage is a secured loan. For example, unlike a credit card where you borrow and the lender promises you will repay, a mortgage lender takes title to your home. Your home acts as collateral, or collateral, for the loan, and if you don’t pay your mortgage, the lender can seize and foreclose on your home.

As a result, if your home doesn’t meet the lender’s criteria, your mortgage loan provider won’t give you the funds you need to buy a home, no matter how good of a borrower you are.

When would a problem with your home cause you to be turned down for a loan?

There are several situations in which a mortgage lender may tell you that you cannot get a loan because there are problems with your home.

Your home may be undervalued

Most mortgage lenders will not lend more than about 90% of a home’s fair market value (there are some exceptions). If your lender follows this rule and your home’s appraised value is less than what you’re paying, your loan may be denied unless additional funds are available.

For example, let’s say you want to borrow $290,000 to buy a $300,000 home, and the appraised value of the home is $270,000. The lender can only lend you 90% of $270,000, or $243,000. If you can’t get the seller to lower the price or come up with the remaining $27,000 needed, the lender will deny the loan.

Your home may not be insured

Lenders need insurance to protect their investments. If you’re looking to buy a home in a very high-risk area and can’t find a homeowners insurance company to cover it, a lender probably won’t give you a loan to buy it.

There may be serious problems with your home that may preclude you from getting a mortgage.

Lenders will not lend money to purchase a property that is uninhabitable in its current condition or has serious health and safety concerns. As a result, bad roofs, active pest infestations, structural issues, plumbing or electrical problems, mold and water damage, HVAC problems, and other major defects may make it impossible to get a loan to purchase a home.

If you fall in love with a home that has these issues, you may have no luck finding a mortgage lender. At the very least, if the valuation is low, you’ll have to bring in a lot of extra money. In any case, you should think seriously about whether you should move forward and whether it is possible to do so if you must become a cash buyer.

For most people, when they have problems with their home and can’t get a loan, it’s best to just walk away and find a new home. When looking to buy, include contingency financing in your offer. This will give you the right to walk away without losing your deposit if you end up not being able to get a loan for your home.