Most people report that because they cannot qualify for a credit card or car loan they presume they will be declined for a home loan or mortgage refinance. We find that this is untrue, in fact the opposite is true: it is easier to qualify for a home loan or mortgage refinance than car loan or major credit card.
The top 3 reasons people believe they will not qualify is the following:
- The amount of the loan. If they cannot even be approved for a $5,000 credit card, how can they be approved for a $250,000 home mortgage?
- The application process is complex. If the simple credit card application that requires no documentation results in disqualification, how can the complex home mortgage application possibly be approved?
- The emotional nature of the purchase. The purchase of a home represents a huge emotional step for many people and the prospect of rejection keeps many people from even attempting to qualify.
Ironically these are the very three reasons it is easier to qualify for a mortgage.
Real Estate is considered very secure collateral. Because of this, mortgage lenders are more comfortable lending money against property as opposed to unsecured credit lines, credit cards, or a vehicle that depreciates every day. Because of the size of the loan there are thousands of institutions that can make money servicing the loan and millions of investors that seek real estate based security resulting in a competitive marketplace that contains thousands of loan programs attempting to meet the needs of every potential borrower.
The complex application process enables lenders to look beyond the individual's credit rating and take into account factors such as your job security, debt to income ratio, value of the property and ability to make the monthly payment. The consumer credit report represents a lesser role in mortgage approval.
The emotional nature of the collateral adds security to the lender. The mortgage payment is proven to be the first priority when it comes to making monthly payments. Statistics show that people will beg and borrow to keep their home as opposed to unsecured credit cards.
With the variety of mortgage programs available to consumers, we find that if a consumer wants to purchase or refinance a home they should contact a lender or broker that specializes in home purchases. The professionals we consulted were extremely knowledgeable and more than willing to explain the process. Those people who did not qualify for home mortgage left with a clear understanding of what they could do over the next few months to qualify for a mortgage that meets their needs.
