One can obtain loans directly through a financial institution, a mortgage broker, or via the Internet. Before taking out a loan, make sure to educate yourself. Use the web to become familiar with the lending process and mortgage information such as current rates and terms.

It is important to shop around when seeking a mortgage. Obtain at least a dozen quotes from lenders in your geographic area. Ask the lenders if they can do better than other quotes.

To speed up the processing of your loan, it is important to provide any paperwork the lender asks for promptly.

Reasons Mortgages Are Declined

Reason #1: Insufficient Cash

Applicant has insufficient cash for the down payment and closing costs. If an applicant states on a loan application that no funds have been borrowed for the down payment, one should be prepared to show that the down payment money has been 'seasoned. (i.e. in one's account for 60-90 days). The alternative to 'seasoned. down payment dollars is a gift letter, often from the buyers. parents, stating the money is a gift not intended to be repaid.

Reason #2: Insufficient Income

Applicant has insufficient income to make the monthly payments. Total debt payments should not be more than 36% of one's total (gross) income. This percentage could be higher if one has a good credit record and is carrying more debt responsibly.

Reason #3: Too Much Debt

Applicant has too much debt (high debt ratios). If one has many credit cards with increasing balances, pay off some of these debts before applying.

Reason #4: Insufficient Credit History

Applicant has insufficient credit history. One should keep track of when telephone, utilities, and rent bills are paid to show that one has a record of paying on time.

Reason #5: Bad Credit History

Applicant has bad credit history. Two or three late payments on credit cards, auto loans, or other debts could trigger a decline or one to pay higher rates and/or fees. Although one may have had difficulty meeting financial obligations in the past, maintaining good payment records recently can allow one to qualify for a loan. Obtain a copy of one's credit reports before applying and improve credit habits for a year before applying. One may need to provide satisfactory explanations of past financial difficulties. Applicants with lower credit scores may still obtain a home loan but may have to secure a 'sub-prime. loan and pay higher interest rates (usually 2-4% higher) and extra loan fees. If a high interest rate loan is secured due to bad credit, seek a rate break after establishing a good payment record (i.e. over a year) from the current lender first or find a new lender.

Reason #6: Low Home Appraisal

The home appraisal value is less than home's purchase price. A way around this is to have the seller lower the price or increase the down payment so the mortgage amount is reduced.