Utah mortgage lenders are selective in choosing customers. Although they can sell the property used as collateral for the loan, financial institutions don’t want to resort to foreclosure as much as possible. Lenders don’t always recover all of their losses from the proceeds of the sale of a foreclosed house. Some aren’t lucky to at least break even or to recoup their investment fast.
As a borrower, don’t think that you can easily qualify for a mortgage loan in Utah. A lender won’t hesitate to deny your application if you don’t fit the bill. Let us find out below why you may get a no when you apply for a mortgage.
You Apply for a Loan That Doesn’t Match Your Credentials
Loan programs are different because they’re designed for specific borrowers. If you try to obtain one that’s not meant for you, the chances are that you’ll face rejection.
Generally, you need to have good credit and pay a large down payment to qualify, but these qualifications are not set in stone. Many lenders accommodate bad-credit borrowers and have lax loan-to-value ratio requirements.
When you lack outstanding credentials, choose a lender with proper risk appetite to grant your loan request. Be prepared to make concessions, like accepting a slightly higher interest rate, to make up for your shortcomings to secure a mortgage.
You Don’t Have a Stable Job
Lenders think with foresight. They want to see your capacity to repay the loan to increase or at least stay the same to prevent default.
Self-employed borrowers, like freelancers, usually have to jump through more hoops to prove that they have stable employment. Proper documentation is key, so determine the papers your prospective lender needs to see to convince that you’re creditworthy enough to merit a mortgage.
You Have a Lot of Debt
Having a stable job and earning a handsome paycheck means nothing if you’re drowning in debt. It’s hard to justify your creditworthiness when you have a habit of maxing out your credit card and paying your bills late.
The ideal debt-to-income (DTI) ratio is 43%. This magic number refers to the back-end DTI ratio that includes your projected mortgage payment and other monthly debts. The front-end DTI ratio involves the mortgage payment only and has a different maximum, which may vary from lender to lender.
By and large, lenders want your DTI ratios to be below the acceptable limits. Keeping both of them low can earn you an incentive in the form of a lower interest rate.
You Lack Enough Cash
You’re not required to shoulder 20% of the property’s price. However, you still need to have enough funds to satisfy the minimum borrower contribution for the down payment and cover the closing costs.
Fortunately, you can use the money coming from sources other than your own pocket to pay for the necessary upfront fees. Also, some lenders agree to take care of the closing costs in exchange for more interest.
Qualifying for a mortgage is hard as it should be. Obstacles exist to protect not only the interests of lenders but also yours. After all, you’ll suffer the most if you acquire a loan you can’t really afford.