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5 Mortifying Reasons Mortgage Applications End Up in the ‘Reject’ Pile

Picture this nightmare: You apply for a mortgage, but your application gets rejected. Sadly, this is a reality for some home buyers. It's also a way to establish a credit history that shows you've got a solid track record paying off past debts. While a poor credit history riddled with late payments can certainly call your application into question, it's just as bad, and perhaps worse, to have little or no credit history at all. There’s a silver lining, though, for those who don’t have credit established. New credit card applications can ding your credit score by up to five points, says Beverly Harzog, a consumer credit expert and author of “The Debt Escape Plan.” That hit might seem minuscule, but if you’re on the cusp of qualifying for a mortgage, your new credit card could cause your loan application to be denied by a lender. So, the lesson is simple: Don’t open new credit cards right before you apply for a mortgage—and, even if your lender says things look good, don't open any new cards or spend oodles of money (on, say, furniture) until after you've moved in. You missed a medical bill Credit cards aren't the only debt that count with a mortgage application—unpaid medical bills matter, too. Problem is, mortgage lenders like to see at least two years of consistent income history when approving a loan. But if you’re gainfully employed and just considering changing jobs, you’ll want to wait until after you close on a house so that your mortgage gets approved.