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Ten Reasons for Loan Rejection

Applying for a mortgage in the U.S. can be fraught with pitfalls. You can easily be rejected for many reasons. Here are the top ten most common reasons for banks to reject loan applications

1.Changing Jobs:

Just changed jobs and earned a sweeter salary, so getting a loan should be easier, right?

The answer is, not necessarily! If the borrower jumps from an internet company to another financial company and hasn't completed two years, the bonus from the new company typically isn't counted towards the application income. This is because, according to loan requirements, bonus income must have a 2-year history to be included in the income. If you switch industries, calculations need to be redone.


2.Change in the Nature of Income

If the applicant previously received a W2, but this year it has changed to a 1099, it will also affect the loan. This is because the nature of income from a 1099 is different from a W2, and banks have different verification standards for each.


3.Decline in Company Revenue

If the applicant runs their own company and had good tax filings for the previous two years, but this year there was a significant loss, it is very difficult to get approved.


4.Gift Money

US banks have specific requirements for gift money. Most banks only allow gifts from relatives who have a blood or legal relationship with the borrower.


5.Gift money for investment property

If you're buying an investment property and a relative gives you a large sum of gift money, this would seem unreasonable to the bank. After all, if you don't have money, why are you buying an investment property?


6.The property has illegal modifications, unfinished renovations, pending construction applications, safety hazards, etc.


7.Credit score is too low


8.Poor record

If the borrower has a bankruptcy record in the past four years, it can lead to the loan being denied.


9.Appraised Value is too low

If the borrower's Closing Fund is limited, it might also result in the loan being rejected.


10.Bank bankruptcy

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