The Difficulties of Receiving a Small Mortgage Loan

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November 7, 2012 by Bill Johnson

Obtaining a loan from a financial institution is no easy task. As eagerly as a small business owner or prospective homebuyer is to apply for such a loan, the lender to which they submit their application is not equally enthralled. From a lender’s perspective, every person who applies for a loan poses a risk. Many factors are taken into consideration by a bank before they decide to give an individual a loan, and there are a few things you can do to increase the likelihood of being approved.

Applying for Mortgage Loans can be tricky. Here are a few things that you can do to ensure the greatest possibility of getting the loan that you need:

1.   The financial lender that you apply for a loan with will only accepts your application after you have proven that you are reliable and consistent. Most mortgage lenders look at a potential borrower’s employment history. Your chances of being approved for a loan will be better if you have worked for the same company for at least two years. Lenders want to know that the people they lend to will be able to make their payments. If you are frequently jumping from job to job, then you will have more difficulty applying for a mortgage.

2.   A good credit score is vital in almost every aspect of finances, but especially when you are applying for some kind of loan. A good credit score means that you have been prompt in your payments and are unlikely to default on any of them. Lenders love a borrower who is certain to pay them back. Homebuyers with a good credit score pose the least amount of risk, and should have little difficulty getting mortgage loans.

3.   If you have a lot of debt—not just the debts you have for things like your car or your college education, but for frivolous things like vacations and jet skis—then a lender is simply not going to be interested in lending to you. Reducing the amount of debt you have will not only give you better chances at getting approved for a loan, it will also make you more financially stable. Get rid of all of that extra credit card debt, and your entire life will become all the more simpler—plus, you will probably get that loan you want.

These days, banks are very reluctant to lend to people. Even individuals with a sound employment history, good credit background, and little to no debts have trouble occasionally. If homebuyers who pose so little risk are having a hard time getting approved, think how much more difficult it is for someone who is unemployed, with poor credit and lots and lots of debts.

But when you stop to consider the situation from a lender’s standpoint, you can sympathize with them. After all, much of the current economic condition can be attributed to the sub-prime mortgage crisis of 2008. Back then, the government insisted that the banks give mortgages to people they knew would not be able to pay them back.

The results were disastrous, and our economy and housing markets are still feeling the ill affects of them today. As you can probably imagine, the financial lenders are not too keen on making those same mistakes again. Therefore, they are far more cautious about whom they lend their money to.

However, even despite theses difficulties, getting a mortgage is not altogether impossible. By following the advice given in this article, you will increase your chances of being approved.


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