What To Do When Your Santa Cruz Real Estate Loan is Declined

Posted by Lauren Spencer on Tuesday, March 26th, 2013 at 1:01am.

There are many reasons why a mortgage loan for your Santa Cruz real estate could be declined. It doesn’t have to be the end of your real estate dreams. Here are a few things to consider if you’ve been turned down for a mortgage:

Loan-to-Value Ratio
The loan-to-value ratio (LTV) is the percentage of the appraised value of the Santa Cruz real estate that you are trying to finance. For example, if you are trying to finance a home that costs $100,000, and want to borrow $75,000, your LTV is 75%.

Lenders don’t like a high LTV. The higher the ratio, the harder it is to qualify for a mortgage. To reduce the percentage, you can save up a bigger down payment. Some lenders may approve the loan if you buy mortgage insurance, which protects the lender in the case of default, but makes your mortgage payment higher.

Credit-to-Debt Ratio
Lenders will be less likely to approve your mortgage loan if you have a high credit-to-debt ratio. The ratio is figured by dividing the amount of credit available to you on a credit card or auto loan, and dividing it by how much you are currently owe.

High debt loads will scare away most lenders. Try to keep your debt to under 50% of what is available to you. Lenders will appreciate it, and you will be more likely to get approved for a mortgage.

No Credit or Bad Credit
Few things can derail your mortgage loan approval like credit issues. Having no credit record can be as bad for your approval chances as bad credit. With no record of timely loan payments from anywhere, a lender is unable to determine your likelihood to repay the mortgage. Some lenders will consider other records of payment, like utility bills and rent reports from your landlord.

If you have frequent late charges or collections, you’ll need to work at getting those paid on time, every time. There aren’t many lenders who’ll approve someone with bad credit, especially in today's market.

Talk to your loan office to determine which problem applies to you, and learn the steps to fix it. Then, you can finance the Santa Cruz real estate of your dreams.

If you're ready to buy a home or condo, I can help. Together, we'll determine how much you can afford, and I'll negotiate to get you the best price and terms. Give me a call now at 831.662.6522 to get started!

For additional real estate information, please visit my home page at www.MySantaCruzRealEstate.com.

LINKS:
Loan-to-value ratio

Appraised value

Mortgage insurance

 

About Lauren Spencer

Award-Winning Santa Cruz REALTOR®

Lauren Spencer is your local real estate expert, specializing in Santa Cruz real estate and surrounding communities—this is where she lives, works, and plays too. Let her know your questions about the community and county and she'll be happy to fill you in on all you want to know! Lauren Spencer has consistently been voted best local REALTOR in Santa Cruz and is always happy to offer her advice and expertise. Call her at: 800.226.4717.

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