Home sellers usually follow through the legal and formal processes involved in buying a new place. You as a home seller, end up putting a huge deposit and shell out about $1000 to upgrade your house and inspect it. After all the piles of documentation, you receive a series of answers to questions you have and the loan officer calls you up to tell you the good news – your loan approval came through. Naturally, you would feel excited and announce your progress to friends, family, and colleagues. You feel sure that this is a done deal! You schedule the movers, you plan how to pack and even check out the new neighborhood. Then it all goes to pot. A cancelled mortgage.
You receive a call from your lender and he or she tells you, “Unfortunately, your loan cannot be funded. Your application was declined.”
The shock would take some time to sink in, but the truth is that you cannot get that loan that you were so ready for after all! You wonder what went wrong; it was a done deal so what happened? Why was the mortgage cancelled? You were so sure it was all fine when the deal went off, now what can you do to save this?
Unfortunately, this scenario happens too often and with too many people. The good news is that this situation is usually preventable and you can rectify it.
The most frequent scenario is that the loan originator makes the initial credit report, and after that, the borrower withdraws extra credit.
Calculations on debt and income, which are an important requirement to grant credit, always depend on the initial credit report. Most lenders have a system that monitors the borrower’s credit and it triggers an alert each time the borrower opens a new account or withdraws additional credit. Remember that whenever one borrows excessive credit, it can worsen the person’s credit scores. In fact, a lesser middle credit score can result in a higher loan cost, and if it falls below the line then it can result in a denial.
The best thing in your favor is not to buy any new furniture, new car or anything excessive or luxurious. Stick to your normal grocery shopping and keep your credit scores or qualifying ratio just right so that it can get you a credit or mortgage grant that will not lead to a mortgage cancelation.
Additionally, if you plan to change jobs while you wait for the credit or mortgage approval, never open your mouth at work. Lenders always call the current employer to confirm your job status before funding. Better yet, strive to keep a stable job while paying for a mortgage.
One more reason why some credits and mortgages do not get through is that the borrower is a fraud with fake tax returns. Always provide the lender with the same documents you provide the IRS. Lenders validate your documents with the tax authority, so if there is a problem with verification, they will decline your application immediately.
Another reason for cancellation of some credit and mortgages is that the lender may need proof of permit for an additional room. The local municipal authority will inspect and approve the permit, but if there is no need for an additional room in the property, then it will be a major tick-off.
To reduce the risk of failure of getting funding, clear all the risks that can lead to a cancellation of your mortgage or credit application.