CoreLogic released data on September 26, 2019 from a report by the Consumer Financial Protection Bureau (CFPB). This report included a new mandate that lenders provide the reasons for denial when turning down a mortgage application. In 2018, 2.65 million loan applications for single family one-to four-unit properties were denied, making the overall denial rate 24.7%.
The number one reason for denial was a higher debt to income ratio than 43%. 36.8% of all denials fell into this category. The number two reason was credit history – 33.9%.
So, more than 70% of all mortgage application denials were because of high debt to income ratio or lower than acceptable credit score and history.
This is important information for anyone considering carrying a note as result of selling a property. You know the 2 major reasons your potential buyer could not obtain a mortgage loan. It is in your best interest to ensure the note payment being discussed fits comfortably in your potential buyer’s budget. And, you owe it to yourself to have your buyer provide you a copy of his credit history and score. It’s just good business and could go a long way in protecting your interest and avoiding any potential default.
