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- High debt ratio: Even if you have a stellar credit score and lot’s of money in the bank, a high debt ratio is a problem when trying to get a mortgage. If your housing payments and your credit obligations are greater than 45% of your monthly income, it will be very difficult to obtain a mortgage, at least without making some changes. If debt such as car payments and payments on credit cards are holding you back from getting a mortgage, take an in depth look at those accounts. Can any of them be paid off in full? If not, see if your payments can be consolidated into a lower payment. Your loan officer will be able to assist you in managing your debt better.
- When a solution creates another problem: Getting a loan can be frustrating. For example, if a loan officer asks you to provide pay stubs showing your yearly income and last year shows a lower income than previous years, your loan officer may ask you for a letter of explanation about why your income is less. Sometimes these conditions can snowball, making the process slow. If things get complicated, consider cancelling the loan and starting over with very clear directions.
- Undocumented funds: Even if you are self employed, lenders will still want your funds documented. Any funds being deposited into your account that are separate from your income need to be documented, explained, and sourced in order to be considered loan eligible. If it is possible, try to avoid depositing monies into your bank account that you will be unprepared to document. Instead, try using a different asset account without the deposit activity or try getting gift funds that you can provide documentation for.