Not every mortgage application causes it to be to the finish line. In reality, lots of mortgages fall out of the pipeline early on for a variety of different reasons.
Sometimes is it doesn\’t customer who has a change of heart, and also other times it\’s the lender which says no.
Miami Mortgages Are a Maybe
Amazingly, nearly 20% from the mortgage applications in the Miami metro area were denied a year ago, per HMDA data parsed by MarketWatch.
Of the 15,887 mortgage applications received, 3,086 were plain denied by the lender. That represented a 19.40% denial rate, the top in the nation. And well above any metro area in the United States.
For the record, this only includes conventional mortgages on owner-occupied dwellings, so FHA and VA are excluded, and perhaps jumbos too.
As for why Miami leads the media in mortgage denials, it may be a variety of reasons. For one, that it was especially hard hit while in the mortgage crisis, and one within the worst areas in terms of foreclosure counts.
This meant numerous borrowers who owned homes may not qualify for a subsequent mortgage due to prior blemish, though after sufficient time passes they could qualify as boomerang buyers.
Of course, that needs years of healthy credit habits to counterbalance the damage involving the foreclosure.
Additionally, there are a number of condos in Miami, and denial rates are typically higher on such properties versus single-family homes thanks to additional requirements like occupancy rates and homeowners’ association issues.
Yes, you could be perfectly fine as a borrower, however, if the complex has some outstanding issues it may leave your mortgage homeless.
Another issue around the property front has to do with rapidly appreciating prices. While a customer might be willing to pay a very high price for a home, an appraiser may balk along at the lofty valuation. If it is supplied in low and the borrower does not work out to increase their down payment or LTV, the obligation could be DOA.
In Miami, the most common causes of denial were insufficient collateral in addition to a high debt-to-income ratio, each making up about a third of denials in the area.
The collateral issue was nearly double the 18.3% rate seen nationwide.
Nearby Tampa Bay experienced the 2nd highest denial rate (12.60%) in the nation last year, likely for similar reasons mentioned previously.
The New York, Jersey City, White Plains – N.Y., N.J. metro (12.30%) was the last most common place to be denied for that mortgage, followed by Las Vegas (11.60%) and Chicago (10.20%).
Mortgages Least Likely to Be Denied in Minneapolis
Conversely, the Minneapolis, St. Paul, Bloomington – Minn., Wis. metro was the very least likely place to get denied by the mortgage lender last year, with a denial rate of just 5%.
Of the 44,191 applications reported, just 2,221 weren\’t approved.
In the Twin Cities area, conditions are most often the exact opposite of South Florida. In short, speculation didn\’t run rampant and as a result, home prices didn\’t get out of control.
That meant fewer buyers overextending themselves and much less foreclosures as a result. Homes are relatively cheap there so it\’s harder to get into trouble.
Other winners included Portland (5.60%), Denver (6.10%), Boston (6.50%), and the DC area (7%).
I\’ve already written extensively for the many reasons why mortgages get declined. It could help to review before applying for any mortgage to at least eliminate the obvious ones and enhance chances of approval.
It\’s impossible to be certain mortgage approval because every property and borrower are different, but you can certainly increase your rate of success by avoiding common missteps and using preparation prior to the loan process.
Mortgage Denial Rates by Metro