Getting Over the Fear of (Loan) Rejection

Is a fear of being rejected for a mortgage keeping you from owning the home of your dreams? If you answered “yes” to that question, you’re in very good company, according to the results of a new survey.

Independent mortgage lender LoanDepot said that OmniTel conducted study 1,005 interviews with Americans, and found a disturbing reluctance among many to take the steps they need to take toward owning a home.

In fact, among people surveyed who don’t own a home (but want to), more than half (56%) said that what keeps them from trying is a fear that they won’t qualify for a mortgage. That fear is even shared by many current homeowners (30%) who would like to by another in the next two years.

A full 89% of the would-be homeowners polled have not taken any steps to see if they might qualify for a mortgage.

Many of these loan-shy Americans are no doubt reacting to a post-financial-crisis regulatory atmosphere in which lenders have had to tighten up their underwriting standards to avoid getting into trouble. And there’s no doubt about it: it is harder to qualify for a mortgage today than it was during the height of the real-estate bubble six years ago.

But, as the old saying goes: “nothing ventured, nothing gained.” Many of those who are shying away from applying for a mortgage out of a fear of rejection, would probably qualify. If you are one of those loan-shy types, here are some things you can do to improve your odds of approval:

Join a credit union! Credit unions are not-for-profit lenders who exist to serve their member/owners, and their communities. Not only will you be treated with care and respect at your local CU, but CUs typically offer some of the best deals on mortgages. A CU will NEVER push you into a loan you can’t afford, or a more expensive one than you actually qualify for. And if your credit is impaired – and approval isn’t likely – your friendly, local CU will help you to improve your credit score so that you can qualify.
Shop around. While a credit union should be your starting point, (and will likely have your best deal), you should cast a wide net, and shop around for the best deal on a mortgage that you qualify for. LoanDepot would of course like to be on your list of possibilities, but there are literally dozens of other lenders – of all sizes – who would like you to apply with them. However:
Watch out for “hard pulls” on your credit report. Applying for too many loans will put a lot of these on your report, and your credit score will take a hit. One or two is fine, but if you accumulate too many, in too short a time, you will be working against your goal of qualifying for that mortgage you need. This is one more reason to:
Join a credit union! Your CU will tell you how your credit-worthiness stacks up. You can use this information to approach various lenders, and get a sense of what you might qualify for without enduring too many “hard pulls.” Use your CU as a “financial home base” as you look into your options.

If you want to own a home, you need to take those first steps. Getting your financial “house” in order is an important first step in achieving your goal. Keep in mind that millions of Americans’ credit ratings have taken a hit in the past six years. Don’t be ashamed if your credit is less-than-perfect – and don’t be too discouraged if you don’t immediately qualify.

Sometimes it takes some time — and credit-building steps – before you get the mortgage you need. This is why you need to start that process at your CU before you start shopping for your dream home. Do the work you need to do, and you will make your dream of home ownership a reality.