I Can’t Get a Home Loan Because I Did What?!?!

Qualifying for a mortgage.

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There are many reasons people don’t qualify for home loans. Bad credit, not enough money, bankruptcy and more.

But there are also a handful of reasons many people do not think of that can derail their home buying dreams.

I sat down with Movement Mortgage’s Marnie Carter and we discussed some of the more interesting reasons people have trouble qualifying for a home loan.

Jimmy Grappone, Skyecroft Realty Group:  Marnie, I am always careful to tell people not to buy a car when they are about to purchase a home.  What are some other unexpected pitfalls you’ve seen potential buyers fall into?

Marnie Carter: Well, one of the more common scenarios that keeps people from qualifying for a loan is credit. Some simply don’t know their credit situation when they go to apply for a loan.   What’s surprising, though, is not only do they not have a clear understanding of their credit, they don’t understand why it is so important to establish good credit.  Not having any established credit can be just as challenging as having bad credit.  We can help you review your credit and get a better understanding of your personal circumstances.  The time to review and understand your credit situation is well before you’re are ready to make a big purchase, like buying a home.

JG: I’ve also seen situations where a buyer’s job change, or not being clear about their type of employment early on in the loan process, has derailed transactions.

MC: That’s true and this is why we are so thorough in underwriting our applicants at the beginning of the loan pre-approval process, because surprises are better discovered early on when there is something we can still do about them. If you are looking to change jobs and feel that you may be in the market for a new home, it may be a good idea to reach out to a loan officer and determine how this may affect your future options. In most cases, if you are able to show two years of consistent income, then you are fine. However, depending on if you are considering starting your own business or changing your job from a salaried to hourly or contract, you may have some challenges. While there still may be some programs available where you can get around this, it is better to know up front if this is the case instead of right before closing.

JG: How about student loans?

MC: Unfortunately, student loan challenges come up from time to time.  If someone with outstanding student loans is on a payment schedule or if their payments are deferred for more than 12 months, then we are able to calculate that into their debt to income (DTI) ratio.  However, if payments are deferred less than a year, some programs require that we count 1% of the total loan amount against their monthly debt to income ratio.  This can really put a dent into your overall debt if you owe a substantial amount.  Example, if you have $100,000 in student debt, we may have to count it as if you have a $1,000 recurring payment every month, even if you aren’t currently making that monthly payment.  This may not leave room to qualify for a mortgage.

JG: Marnie, I wish we had more space to continue this conversation. We’ll have to resume it at another time.

MC: Thank you, Jimmy. Any time!

Marnie Carter of Movement Mortgage can be reached at 704-363-1063 or Marnie.Carter@movement.com

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