The time has never been better to buy a home thanks to the lowest mortgage rates in history backed by a surplus of real estate including many discounted property options. However, as a result of the mortgage meltdown, qualifying for a mortgage has become increasingly challenging. Lenders are now going over the loan application forms of potential borrowers with a fine-toothed comb in order to reduce the risk of financial loss. While qualifications including credit history and credit scores are legitimate reasons to reject an application, pregnancy is not. That has not prevented unscrupulous lenders from using that as an excuse to turn down mortgage seekers.
Pregnancy Prevents Mortgage Application Approval
The New York Times reported on the tale of one pregnant woman who first received mortgage approval only to have the offer retracted the next day. The source of the controversy stemmed from an automatic out of office message reply stating "maternity leave" received by the mortgage lender. After that message was received, the lender rejected the loan in relation to "proof of income."
Proof of income has always been a popular qualification for the mortgage approval process, however, since the nation has been plagued with a stagnant unemployment rate of 9.6 percent, lenders are implementing stricter guidelines for the process. Jean Chatzky, the Today Show financial editor, recently stated "Lenders are saying: 'We need to see income, and we need to see income not just now, but that will actually last for the next three years'. " That reason has been sited for the cause of the loan offer retraction.
Based on the auto response the lender received when trying to contact Elizabeth Budde, a 33-year-old oncologist out on maternity leave, the lender retracted their loan offer with an email stating, “maternity leave is classified as paid via short-term or temporary disability income." After the story hit the media circuit, the lender worked with Budde to resolve the issue.
Legal Reasons for Loan Application Rejections
Upon hearing of the tale, the Department of Housing and Urban Development (HUD) welcomed individuals who felt they were discriminated against in the mortgage process because of pregnancy to file a complaint. According to the agency's website "Housing discrimination based on your race, color, national origin, religion, sex, family status, or disability is illegal by federal law."
Lenders do have legal reasons for rejecting loan applications as a way to mitigate their risk of entering a contract that may be nullified due to default. The law allows for application rejection in cases of:
- Immigration status
- Fraudulent information provided on application form
- Lender deemed to "high-risk" because of lackluster credit history, lack of income or low FICO score
- Loan application amount is deemed too high in relation to financial health of applicant
- Incomplete loan application information
- Lack of adequate down payment
Top Mortgage Qualifications
The top three criteria lenders are using in relation to the loan qualification process are:
- Employment and Income
- Payment History and Credit Rating
- Property Variety and Intent of Purchase
Lenders take the time to evaluate each home loan application on a case-to-case basis and those who cannot favorably prove their case can expect a loan rejection. Regardless of the loan type mortgage seekers are interested, experts advise cleaning house in order to qualify for a 30-year fixed rate mortgage.
Traditional 30-year mortgages have the strictest mortgage approval process and qualifying for these types of loans are considered to be the true measure of whether or not an individual will make a responsible mortgage holder. Mortgage seekers interested in testing the waters in relation to the mortgage application approval process can count on Mortgage Marvel to provide the mortgage rates information and access needed to seal the deal.
