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Before you even fill out the application for a home loan, make sure you’re prepared. Here are 5 things that might stop you from getting a mortgage.

Your Credit Score Isn’t What You Think It is

Did you know that you have more than one credit score?? Fewer than 10 percent of Americans know this. Don’t rely on free credit scoring websites. Go to one of the three FICO-approved credit bureaus – Equifax, Experian, and TransUnion. For a free FICO score, check with your bank or credit card issuers.

Recent Changes to Your Job or Income

While it is possible to get a home loan after a recent job change, it can be tricky. IF your income structure changes significantly like moving from a salary to commission, it can be trickier. A lender calculates your average salary over the past 24 months when evaluating your application. Your change in pay may not be an accurate reflection of what you expect to make if you have changed to commission based.

Too Much Debt

It’s a common misconception that carrying a balance on your credit cards can give your credit a boost. This is not only untrue, but it can actually hurt your credit score. Carrying balances that are too high could leave you with a high credit utilization rate. If the amount of debt you have is a significant percentage of your credit limit, it could severely impact your credit score – even if your debt-to-income ratio is good.

New Debt

Your loan pre-approval is based on a snapshot of your credit at the time of your application. If you take on additional debt between the time you apply for pre-approval and the time you apply for the loan, it could change the status of your pre-approval. Avoid buying a new car, taking out any sort of loan or racking up credit card debt while you’re in the process of buying a home.

Issues with the Home Loan Appraisal

It is estimated that 17% of home loan rejections are due to insufficient collateral. Before lenders issue a home loan, a value appraisal is required to make sure the cost of the home is not more than the home’s value. You don’t want to pay more for a house than it’s worth – and neither does the lender. Several factors are included such as the value of the property and the condition of the home. Sometimes it is the market itself that could influence the value. Multiple competing offers could push the price of the home higher than its value, or too many foreclosures in the neighborhood could drive its value down.

The good news: An experienced real estate agent should be able to help you through every step of the home-buying process and walk you through what to expect. But it’s important to do the research yourself so that you can be as prepared as possible when it’s time to apply. If your credit may be a problem, talk to a nonprofit housing counselor. (Or attend a homeownership preparation class.) A counselor can help you get homebuyer ready!

Excerpted from: Serena Miller,

Holli Lewandowski, Certified Credit Counselor, Educator, and Advocate