Risky Business: What Makes a Borrower Unattractive?

risky mortgage borrower featuresThese features represent difficulty and potential risk for the lenders.  If you’re mentioned below, you might want to take some steps back to determine whether or not you’re really ready for a loan before you find yourself putting out future fires:

You’re self-employed.

Lenders are wary of self-employed borrowers due to the fact that income is not always stable.  When income isn’t stable, you may or may not be able to make your monthly mortgage payments.  This represents a huge risk for the lender, as you might default on your mortgage.

You have a low credit score.

If you have a credit score that is low, lenders will have a hard time trusting that you’ll pay back your full loan on time.

You’re a first time homebuyer.

Many lenders require borrowers to have a two year housing history before purchasing a home.  However, this isn’t always possible.  If you’re a student who has recently graduated, you can show proof of a year’s worth of rent payments instead.  If you’re not, you’re going to have a hard time.

You just started a new job.

Most lenders won’t give out loans unless you’ve been working at the same job for two years.  This is due to the high rates of unemployment and the fear that you could end up in a job where you won’t be able to make your mortgage payments.

You have made too many big purchases recently.

If you’ve made several big purchases recently, your credit score is probably far from stable.  If you’re thinking about getting a loan, hold off on the big purchases until later on in your mortgage.

You have too much debt.

This is obvious.  Lenders will have a hard time lending to you because your history has shown that you have a hard time paying off your debts.  Work on your debt-to-income ratio before applying to have a better chance.