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What's the major reason people get denied for a mortgage?

Me and my husband are looking to purchase our first house.

We are looking at a 30 year fix with 5% down on a home. Our price range is up to 130,000. My question is about the mortgage process and getting approved for one. It's very intimidating and frighting to hear all the horror stories about people not getting approved. Whats the major causes of people being denied for a mortgage?

I would REALLY hate to find a dream home, and then find out we were denied for any reason. THAT'S our biggest fear.
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September 22 2013 - Richardson
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Best Answer
Fortunately your biggest fear can be eliminated. Getting denied for a mortgage would likely mean a thorough pre approval was not done. The pre approval process is necessary whether first time home buyer or not, and when done properly the borrower, Realtor, and Seller should feel confident that a closing will take place.
Being a first time home buyer is an advantage as it means you have no prior short sale/foreclosure issues, and with 5% down there are several loan program options.
Contact me thru my Profile if you would like to discuss the next step to getting pre approved. My office is at 190 and Preston Rd in Plano.
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September 22 2013
You should get pre-approved before you start searching for a home. A pre-approval is important because it will help you get an idea of a price range you can afford. Also, offers from people with pre-approvals are take more seriously. So I recommend you speak with a lender like myself to help you start getting the loan that you need.

If you have any other questions or need a loan please contact me through the information on my profile page. 

I hope this helps and good luck!
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September 23 2013

This is sort of a gut thing. You could just qualify, but is that enough?

Best case:
20% down, with enough money in liquid form savings to cover 6 months of payments
Have a minimum of 3 credit lines opened for at least 3 years; with less than 33% of lines evaporated. Never paid anything late.
Be at your w2 job or self employed for a minimum of 24 months.

You are set.

Anything less in your back pocket is a compromise, but is still possible

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September 22 2013
First you speak to a lender and get pre-approved. 

Make no purchases like new credit cards, trading in a car, buying furniture. Don't close an account or change jobs.

Then you start looking for a dream home.
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September 22 2013
The major cause of people being denied for a mortgage is to sign a contract to purchase a home without getting pre-approved by a lender. Do it in the proper order and get your loan approved first, then you can be confident in signing a contract. Also, most real estate agents will insist that you have worked with a lender before even writing a contract for you.
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September 22 2013
I would REALLY hate to find a dream home, and then find out we were denied for any reason. THAT'S our biggest fear.

Then don't...if you work with an experienced mortgage professional that reviews your income, credit, etc, you should not run into that problem.

The problem I find more often than you can imagine is where individuals start the shopping process before being pre-approved for a home loan just to get let down in the end. My referral partners won't even take out clients unless they know they have been pre-approved...don't waste your time; shop for the home loan, then the home!
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September 22 2013
Profile picture for wetdawgs
Start with a pre-approval, and consider purchase for less than the maximum pre-approval amount.   Make sure everything you share in the pre-approval is 100% accurate (e.g. don't exaggerate income if you are self employed and show lots of deductions on  your taxes; don't ignore debts). 

Then:

Keep your jobs.

Don't incur new debt (such as cars, furniture, etc).

Document everything promptly, even if the lender asks you for the same thing three times.



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September 22 2013
I agree with Tom, The biggest thing is keeping up with your credit scores and finding a reputable lending company. If it sounds too good to be true it usually is. I guid my clients to a variety of different options depending on thier credit price range and how much they have to put down. I have a lender who does as little as 5% down with lender paid PMI. Call me if you want to talk.

Mary
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September 22 2013
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"I would REALLY hate to find a dream home, and then find out we were denied for any reason. THAT'S our biggest fear."

This is the reason that one of the first things you should do (before even talking to a REA), is find a lender you can work with.

A good lender will...
-- Help explain the process.
-- Explain things like DTI ratios, PMI, etc.
-- Explain pros/cons of the different mortgage vehicles
-- Help you to identify the outer limit of what you will qualify for

And, before engaging a lender, you should also educate yourself a bit on the process. This will help you to identify who is trying to sell you a bill of goods, and who is "being straight" with you. Early on, I used this site to build a basic understanding and answer some upfront questions. It's not necessary to become a mortgage or RE expert, but knowing a bit about both processes is invaluable.

BTW - I never let a REA know the max amount a lender may qualify me for. The REA may ask, but it's none of their business. What the REA does need to know is my desired price range, and that I have been pre-qualified by a lender for that amount.
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September 22 2013
#1 reason.....  Debt/Income ratios.
Usually because the borrower has write-offs on their taxes..... Reducing their income.

Credit guidelines are pretty easy still....

Please feel free to contact me thru my profile here for any follow up questions.
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September 22 2013
 
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