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Mortgage lenders keep tight rein on loan approvals

[Jul 6, 2011.]

 

The Wall Street Journal recently analyzed mortgage information from the top 10 mortgage lenders in the country and determined that 26.8 percent of loan applications were denied in 2010, compared with 23.5 percent in 2009. These home mortgage applications were for refinance loans and for new loans. The Journal's research shows that among home purchase loan applicants, 19.9 percent of potential borrowers were turned down for a loan, compared with 18.2 percent denied in 2009.


Mortgage lenders and loan approvals


According to The Wall Street Journal, one reason lending guidelines are so strict is that the government entities Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) purchase or guarantee 90 percent of all mortgages being offered today. Those agencies are under pressure to avoid too many loan defaults.


Mortgage applicants having the most difficult time getting an approval are those who have experienced a declining or interrupted income due to unemployment. Also, many self-employed individuals are having a harder time meeting the proof of income requirements.


Refinancing applicants are often denied due to low equity. The Wall Street Journal said "insufficient collateral," inadequate debt-to-income ratios and poor credit histories are the top reasons for a loan denial.


Home mortgage approval tips


Mortgage loan applicants can try several tactics to improve their chances of a loan approval. Some of these strategies may take time, and a mortgage lender can give you the best advice for your individual circumstances.



  1. Pay off credit card debt. Aim to use less than 30 percent of the available credit on any one credit card.

  2. Pay your bills on time. Sign up for payment due alerts and pay your bills online to make sure they are paid when due to improve your credit score.

  3. Boost your income with a second job or overtime. A higher income can rebalance your debt-to-income ratio.

  4. Find sources for down payment and closing costs. If you are able to receive a gift from a relative or from a homeownership incentive program, you can either increase your down payment or keep your savings as a cash reserve.

  5. Look for a less expensive home. You may qualify more easily for a lower mortgage amount, so consider purchasing a smaller home rather than your dream home.


To find out about home loan options in your area, go here.


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About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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