Your credit score is the most important factor to a lender deciding whether to give you a mortgage loan, right? Wrong, according to a survey conducted for credit-score company FICO by the Professional Risk Managers' International Association.
About two-thirds of the credit-risk professionals responding to the latest Consumer Credit Risk – North America Trends and Expectations survey were from the United States, and about one-third from Canada.
When asked which factor would make them most hesitant to approve a mortgage loan application, here's how they responded:
- High debt-to-income (DTI) ratio tops the list by a wide margin. The U.S. Consumer Financial Protection Bureau (CFPB) suggests a maximum DTI of 43%.
- The second-biggest potential red flag is if you’ve submitted multiple credit applications recently, such as for a new credit card or car loan. To lenders, this means that you're planning to take on even more debt, which could affect your ability to repay a mortgage loan.
- Low credit score comes in third.
- Frequent job changes and lack of savings round out the top five.
See the full survey report for more details.
Find information and tools to help you prepare for homeownership on our Ready to Buy web page.
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