Most REALTORs® spend a fair amount of time on marketing themselves and their brokerages. We work to promote our listings to as many home buyers as possible and we try to attract buyers who we would like to represent to purchase a home. When the phone rings, there is always a bit of give and take between the caller and the REALTOR®.
Sometimes one of the first questions an agent will ask is “are you pre-approved for a mortgage?”
Some callers are insulted by the question, because they hear it as confrontational or intrusive. And to be fair, if the caller just wants to know if the house has a fenced yard, immediately being asked about finances will seem presumptuous.
But most agents want to know that a potential buyer is pre-approved because we see so many people who start out thinking they can afford a price point, or they don’t realize that getting a mortgage is more difficult than in years past. It really doesn’t make sense for anyone to spend time looking at homes that they can’t buy.
This post from the KCM Blog gives quite a long list of the problems we see in buying a home today.
10 Surprising Reasons You Can’t Get a Home
by ANN DOUGLAS on JANUARY 23, 2012
Getting a home signifies financial security and an investment for the future. Owning a home is part of the American Dream. There are some surprising reasons why you can’t get a home.
- Down Payment – You may have the required 10%-25% on the asking price of the home you are interested in but how you acquired it and how long you’ve had it could keep you from getting the home. Many times relatives offer young couples the down payment. Lending institutions take this into consideration when looking at the ability of a homeowner to keep up with mortgage payments. Saving the down payment over time lends to the credibility of money management.
- Credit – Credit history is an ongoing process. Student loans are one of the first obligations a person may have as an adult. Late payments may have a bearing on your ability to acquire a home later in life. Credit scores are also affected by utility payments. Any recurring bill that is paid late may come back to haunt you even though your financial situation is now more sound. Your debt to income ratio ideally needs to be under 45%. Less than a 3 month asset reserve in a bank account will generally keep you from getting a home. Check your credit score with all 3 agencies and make sure there is nothing being reported incorrectly. You need to aim for a score of 660 or better.
- Job Security – Your job history may be why you can’t get a home. Lenders look for stability. If you jump from job to job, regardless of monetary or career improvement, lenders see you as a financial risk. When the economy takes a downward turn, employers tend to retain employees with seniority. Also taken into consideration is the risk of the job.
- Parent History – If your parents have a questionable credit history, you may be dealing under their shadow. If parents foreclosed, you may be affected. If they were late with mortgage or credit card payments, you may be looked upon as having the same traits. If you are asked information on parent particulars, you may need to look elsewhere for home financing.
- Location – The location of a home may affect whether or not a lender is willing to risk mortgaging it. LNG routes, Super Site areas, fault lines, destructive weather patterns all have bearings on mortgage risks lenders are willing to take on.
- Inspection – More and more, home inspections are being required to seal the closing deal. Hopes have been dashed to learn major expenses must be incurred to pass inspection for the approval of the sale.
- Condition – Fixer-uppers may offer pricing that appears affordable. If you have no background of construction or home improvement projects completed, lenders are leery to finance such undertakings. They may require a lump sum amount be in an account to cover the improvements necessary to ensure the property does not result in a loss to the lender.
- Liens – If you owned property before and were subject to liens for unacceptable reasons such as credit card debt or unpaid taxes, you may not get the home you desire. A current homeowner may also have substantial liens that need to be satisfied at closing either from the sale itself or as additional costs to the buyer.
- History – The history of the home may be the deciding factor that keeps a lender from financing in your behalf. A murder, haunting, nearby sinkhole, or other less favorable activity, bear upon the lender’s willingness to finance such a home.
- The Bank – Economic conditions and bank lending history may be the reason you can’t get a home. Banks may be leaning toward only very secure clients to up their lending credibility. If a bank turns you down, look to other options before you decide to settle on thinking you can’t get a home. FHA, VHA, or a first time buyer program offer other alternatives for which you may qualify.
If you can’t get a home loan with one lender, chances are good that another institution will also turn you down. You should take some time and work at increasing the good points that will work in your favor. Try again when your situation has improved.