3 Reasons Why Your Mortgage Renewal Could Be Denied
The mortgage renewal process is a way to refinance your existing loan. After 18 or 36 months, the interest rates on the loan are re-adjusted to the current market rate at that time. If you have a good credit score and your income has increased, it’s likely that you will be able to get a lower interest rate from this type of refinancing. But, if you’re not careful, you could end up with a denial for your mortgage renewal because of these three reasons.
Reasons your mortgage renewal could be denied
If your income has decreased, you may experience trouble getting approved for a mortgage renewal. If your income is too low, the lender will view this as a sign of high risk and will deny the loan. In order to get approved for a mortgage renewal, you need to show an increase in your income over the past year. 2. Credit Score
A low credit score will also cause problems with getting approved for a mortgage renewal. Lenders are wary of anyone who has poor credit history because it means that they have not repaid their debts on time in the past. If you have too many recent accounts going into collections or any other information that raises red flags, then you might be denied for a mortgage renewal because of this reason. 3. Loan type
The type of loan that you currently hold is another thing that could make it difficult to get approved for refinancing. If you’ve had difficulty making payments on time recently, then you should try and refinance from an adjustable-rate loan to a fixed-rate loan in order to avoid any issues with future mortgage renewals being denied because of this reason.
What to do if you have a denial
The mortgage renewal process is an excellent way to get a lower interest rate on your loan. But, if you’re not careful, you could end up with a denial for your mortgage renewal because of these three reasons.
1. Your credit score is too low: If the lender deems that the risk for lending to you is too high due to your credit score, they will deny your mortgage renewal application.
2. You have a lot of debt: The lender will want to know how much debt you have in order to decide whether or not they are willing to lend money to you again. Excessive debt could lead to a denial of your application as well.
3. You don’t have enough income: Lenders want assurance that they won’t lose their investment in the long-term and if they determine that there is a risk of losing their investment by lending money to you, then they might deny your application because of the lack of income.
The mortgage market is changing, and lenders are stricter than ever. This means your credit score, down payment, and other variables will play a greater role in determining whether or not you get a mortgage renewal. If you’re denied for your mortgage renewal, don’t panic! There are a few things you can do to help.
First, find out why you were denied. It could be that your credit score was too low, for example. If that’s the case, make sure to build up your score by paying off any outstanding debt and avoid opening any new credit lines. If you have a high enough score, it’s likely the lender will approve your application once you submit it again.
If your denial was due to not having enough cash for a down payment, try saving up a little longer and using the extra time to look for a better deal on a home. Finally, if the lender says they need more time to process your application, go ahead and submit it again in the future.