Common Reasons For Failed Bank Statement Home Loan Applications
Securing a bank statement home loan can be a great way to purchase a new home and get a competitive interest rate. But, like all loans, there is always the risk that your application will be denied — especially if you don't do your homework.
To ensure you have the best chance of being approved, it's important to know what could potentially hinder your chances and be prepared accordingly. Take a look at some common reasons why applications are rejected.
Unfavorable Credit History
Your credit history plays a vital role in how likely you are to secure a loan — and this is true for bank statement home loans too. If you were previously unable to pay off other debts or have defaulted on payments in the past, then lenders might see this as enough reason not to approve your application. They'll view you as a risk and may be reluctant to let you borrow money.
Make sure you review your credit score before applying for any kind of loan, so you can identify any areas where improvement is needed before continuing with the process. You can also talk to your lender beforehand to see how best to tackle any negative points on your record.
Being prepared with all necessary documentation is key when applying for any loan. For bank statement home loans specifically, lenders need detailed evidence that shows income from self-employment sources such as rental properties or investments.
If these documents aren't provided up front, it can seriously delay the process or even result in automatic application rejection. Similarly, if your bank statement records don't provide sufficient evidence of steady employment or income, lenders may not feel comfortable approving the loan.
It pays to become familiar with what documents are required before beginning and make sure they are ready when submitting your application. This way, you can significantly increase your chances of quick approval.
Having sufficient savings is also something that lenders look for when reviewing applications. While having no savings won't automatically disqualify you from getting the loan (since this type of loan doesn't require large down payments), showing you have some money saved up is still beneficial as it demonstrates financial responsibility.
It also better prepares you should anything go wrong after taking out the loan — like job loss or emergency expenses.
Some lenders will want to take a look at your savings account to make sure you have enough money to act as a safety net while paying your loan. If you don't have enough saved up, then they could be less inclined to approve the loan or increase the interest rate.
To learn more about bank statement home loans, contact a finance and loan professional in your area.