Tacoma MortgageTips after DECLINE

In recent years, Tacoma, WA’s decline rate for mortgages has increased due to credit challenges.  Here are some of my thoughts on what to do if this happens to you.

If you are interested in purchasing a home, but your application for a mortgage was rejected, you have options to consider.

You can inquire of the lending institution as to the reason for your decline, but they won’t likely tell you the entire story because they are afraid of a lawsuit. There are many factors that the bank considers when deciding whether or not to approve your loan request.

Many of these reasons may have nothing to do with you personally. Financial institutions have their own guidelines and they’ll never share them with you. Regardless, one of the MAIN considerations is your credit score. You have a lot of control over this factor.

What to do after you received your mortgage declination letter??

You have to make a decision if you want to continue moving forward with your transaction anyway. If so, this will require you to find financing alternatives. One common option today is getting the seller to carry the mortgage. Even if you have bad credit you still might be able to get the owner to provide “owner financing”. Because deposit interest rates are extremely low right now, sellers might be very interested in getting more than 0.25% on their money. This will probably work best if you provide a significant down payment on the transaction. But if the seller is very motivated, they might be willing to provide owner financing without a substantial down payment. It’s worth a shot!

Another option is to work with “hard money lenders” (financial institution that lend money to distressed buyers).  They tend to  charge higher fees and interest rates. If that is the only option available, you may want to delay your transaction. Never take hard money loans if you can avoid it – even if it means you can’t  continue with the transaction.

Regardless of your decision to go ahead with the transaction or not, you should do everything possible to make yourself a more appealing borrower.

Here is a couple of tips:

1. GET your credit score and report.

Are there any errors on your report? If so, you have the right to demand the credit bureaus correct your credit report errors.  They have 30 days to investigate and correct your report. The only way you’ll know if there are errors is if you first get a hold of your report. Fortunately, you can do that easily. You can get you credit report free of charge once per year at www.annualcreditreport.com.  Financial experts report that more than 80% of credit reports contain errors!

2. Improve your credit score

You may need to improve your credit score. If you can’t pay off your credit card balance every month, keep the balance at 10% of the credit limit as you improve your score.  30% is acceptable otherwise.  Also, do not miss any payments! If you have any late payments, request a goodwill removal.  Lastly, do not get too many inquiries (hard pulls) on your report.

3. Don’t job hop

Financial institutions fear when a borrower changes jobs often. It can demonstrate instability and high risk. Try to stick with your job for at least 2-3 years.  This is also a great way to stay out of debt .