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Mortgage underwriters reject one out of every 10 mortgage loan applications. This is often because the applicant has too much debt, a spotty employment history, or a low credit report. However, by knowing what the underwriter reviews, you can make your application as attractive as possible.

Percentage Of Va Loans Denied In Underwriting

Percentage Of Va Loans Denied In Underwriting

Buying a home requires checking and rechecking your finances several times. While that can be frustrating, it makes sense; Not everyone can be trusted to borrow hundreds of thousands of dollars.

Understanding The Mortgage Underwriting Process

One of the people who set up this trust is the mortgage underwriter. When you apply for a mortgage loan, your loan application finally lands on the underwriter’s desk. A mortgage underwriter determines whether you are trustworthy enough to repay your loan by reviewing how you have previously handled money. This is a fairly objective decision, but is there any way to prepare?

In this article, we’ll review the underwriting process, what an underwriter can look for in a mortgage application, and how to put your best foot forward.

How many people get rejected in underwriting? According to 2020 data from the Consumer Financial Protection Bureau, 9.3% of applications to buy a new home are denied and 13.2% of applications to refinance a home are denied.

Again, let’s be practical. Real estate brokers, mortgage brokers, banks and other lenders realize that people pay fees when applying for a mortgage. They want to be confident that the potential buyer will get approval before they start the process. The buyer also wants this because they are paying the mortgage application fee.

Denied Credit? Here’s What You Can Do About It

While it’s impossible to know for sure whether an underwriter will approve your application, you can get a feel for how likely you are to get a loan during the pre-qualification and pre-approval stages. Are you just within the lender’s eligibility requirements? Would a small change in your credit score, income or debt level jeopardize your chances? If the answer is yes, you may have a better chance with another lender.

In any case, it’s a good idea to apply with five or more lenders when looking for credit. That way you’ll be confident you’re getting the best rate and terms possible for your situation.

There are practical reasons why a bank decides it doesn’t want to lend you money. Here are some common reasons.

Percentage Of Va Loans Denied In Underwriting

This one is pretty obvious. Banks don’t want to take you on as a borrower because you have a dismal record of making payments on time. You have student loan debt, credit card debt, or auto loan debt. You miss these payments or make late payments. They don’t like your credit history.

Lenders More Likely To Deny Conventional Mortgages To People Of Color Living In The Twin Cities

Try this: Check your credit score and credit report ahead of time. correct errors. Pay off your credit cards. Pay on time.

Your debt-to-income (DTI) ratio looks at how much your monthly salary pays off credit cards, student loans, and other debt. The underwriter wants to know what this picture will look like when you make these extra mortgage payments. Statistically, they want to see a ratio below 50%.

Before you decline, calculate your DTI. If it’s more than 50%, there’s a good chance the underwriter will reject your mortgage application.

Try this: Your credit card balance is probably the most expensive debt you have. If you can afford or pay off this debt, you should bring the ratio down.

To 620 Fico Home Mortgage Loans

Once you agree to buy a home, you hand over the down payment and the bank gives the rest of the loan as mortgage. The bank may think that you are not putting up enough of your own money and that they are taking all the risk. They want you to have more “skin in the game”.

Banks and other lenders want to give mortgages to boring people. They prefer people who have been doing the same job in the same company for years. If you’ve recently changed companies or lost your job, that could be a problem.

Try this: If you’ve changed jobs in the same field or changed firms to accept a promotion with higher pay, that’s a good thing. If you show little or no income but have assets, an asset-based mortgage may be a better fit for your situation.

Percentage Of Va Loans Denied In Underwriting

Once again, banks like boring people. If your bank balance has gone up before you apply for a mortgage, they will ask where the money came from and how long it will be in the account.

Can’t Get A Car Loan? You Still Might Have Other Options

Try this: A logical source of money might be a gift from your generous parents. They want to help you get your first home. You didn’t borrow money to make your bank balance look better. It was a gift. Get a gift letter from the donor explaining that no money needs to be paid.

Why do buyers get home inspections done by qualified appraisers? Because they want to uncover any serious structural problems or any problems with the title. If there are, these problems can cost a lot to fix. Your lender will not like this and the underwriter may reject your application.

In the investment world, people say, “Past performance is no guarantee of future results.” Not so in the world of lending, where lenders believe that your past history of making or missing mortgage payments is a pretty good indicator of your future behavior.

If you’ve filed for bankruptcy, foreclosed on your property, or sold it short, you’ll have serious problems getting a mortgage loan.

Va Loan Closing Costs

You came out on top in the bidding war. Unfortunately, you’re about to set the record for the highest price paid in that neighborhood. Lenders don’t share your passion.

Try this: Banks will lend up to a certain amount, but no more. Make up the difference by increasing your down payment.

After the underwriter considers all of the above information, he or she will decide whether or not you will get a mortgage loan. This can be good news or bad news.

Percentage Of Va Loans Denied In Underwriting

Yes. The lender doesn’t like the information they gathered while digging deeper or it has changed significantly, such as the borrower losing their job.

Working Two Full Time Jobs To Qualify For Mortgage

What can you do to improve your chances of getting approved? It is similar to cramming for exams in school. You don’t just wing it.

No it isn’t. The process may stall as the underwriter waits for documentation. Your loan officer should be your point of contact.

Don’t take on large amounts of debt, quit your job, miss bill payments, or anything else that negatively affects your credit score.

Because underwriters are responsible for making sure you can handle the mortgage loan, the process itself is long and thorough. Below you will find an overview of the underwriters, questions they may ask about your lifestyle, and any documents or reports you may need to provide for your information.

Small Mortgages Are Too Hard To Get

Mortgage loans require a lot of oversight, and the loan goes through many hands before it lands in your bank account. The two most important people in this process are the lender and the mortgage underwriter.

Lenders want to be sure that you will repay the loan they give you, and they want to be very sure. To determine this, lenders and mortgage underwriters conduct extensive background checks on you and your finances.

This includes reviewing your credit report, score and history; your current employment and salary; your previous and current debts; And the property you want to buy.

Percentage Of Va Loans Denied In Underwriting

As of March 2021, Eli Ma (short for Electronic Mortgage Affiliates) reported that the time between receiving your application and disbursing the loan was about 52 days. FHA loans take about 55 days, while VA loans take about 57 days.

Money Moves To Avoid Before Your Va Loan Closes

Let’s be practical: Real estate agents don’t want to show homes to people who can’t afford to buy them. Sellers only want to hear from “qualified buyers”. Your real estate agent will want you to get pre-approved or pre-qualified for a mortgage.

This is where the lender initially reviews your finances, looks at some documents, and does a credit check. There is also another level of pre-approval called “verified approval,” which involves a credit check and a close review of your credit history. However, this process is only the first step and does not include a review of the property. This means that you can be rejected by the underwriter even after being pre-approved.

Bryce Sanders Perceptive Business Solutions Inc. is the president of They provide HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” is available on Amazon.

Bryce spent twenty years as a successful financial advisor with a large financial services firm. She has been published in 40+ metro market editions of American City Business Journals, AccountingWeb, NAIFA’s Advisor Today, The Register, LifeHealthPro, Round the Table, Financial Times site Financial Advisor IQ and FHA Loan Requirements. Kentucky FHA loans are set up by HUD. Borrowers must have a stable employment history of the past two years in the same industry or line of work. Recent college graduates can use their transcripts to replace 2 years of work history…

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