There are more American homeowners renting homes than any other time over the last 50 years.
Almost 65% of Americans are homeowners but over 36% of those homeowners rented instead of owned their homes.
Among other facts about homeowners to consider:
• Almost 40 million homeowners are financially strained
• Over a third of all homeowners allot 30% or more of their income for home finances alone
• The difference between the median income and home renter payment is over 40%
• 36% of people who rent homes make $50,000 or less
• Almost 80% of homeowners are age 65 or over
Over 32% of mortgage applications were denied in 2017. Owning and financing a home is no joke.
However, many aspiring homeowners don’t get to learn about this financial reality because their mortgages are denied.
Where you intend to live can be the ultimate deciding factor in your mortgage being approved or denied.
Before getting into that, let examine some reasons why most almost a third of mortgages are denied
Common Reasons Why Mortgages Are Denied
According to information compiled by the Federal Bureau of Consumer Financial Protection one out of every nine mortgage applications were denied in 2018.
Also, one in four mortgage refinancing applications were denied as well. Here are some reasons why.
• Debt-to-income ratios of 43% or higher
• Applying for new credit cards six months or less before mortgage application
• New credit cards might imply a debt-to-income increase or inability to handle new debts
• Recently changing jobs might imply income instability
• Incomplete mortgage applications
• Low, bad, or non-existent credit score
• History of bankruptcy
• Extended periods of unemployment
You really need to be financially ready to own a home. And, realistic about your ability to pay for it before applying for a mortgage.
Cites Where Your Mortgage Might Be Denied
With that in mind, here is a list of cities where you are more likely to be denied a mortgage. These statistics are based on cost of living data, income statistics, and various mortgage denial criteria.
Miami, Florida
Most mortgage applications in Miami are declined because of high debt-to-income ratios. The mortgage denial rate is over 11.6%. You probably need to make at least $85,000 to live here.
Orlando, Florida
You should be making $78,000 to live comfortably here. Over 9.5% of mortgages are denied due to high debt-to-income ratios.
Birmingham, Alabama
Homeowners need to make $45,400 to own a home here, which is an average income. Almost 9% of mortgage applicants are denied in this city anyway, mostly for having bad credit histories.
Los Angeles, California
You need to earn at least $150,000 to own a house in Los Angeles. Over 8.3% of mortgages are denied here because of high debt-to-income ratios.
New Orleans
You only need an income of $62,000 to own a home here. About 7.8% of mortgages are rejected due to high debt-to-income ratios.
How to Cope with Mortgage Rejection
If you are rejected for a mortgage you may need to accept that you may not be prepared for home ownership. If you have bad credit, take a year to rehab your credit score.
Stay employed in one place for a year and save more money. Then try again. You may also try to apply for a Federal Housing Administration loan.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
