You can have perfect credit and still get turned down for a mortgage.

It doesn’t seem like someone with excellent credit, solid employment, and documentable assets and income would get turned down for a loan, but it can happen.

One of the fundamentals of writing a solid mortgage is to ensure that the property is acceptable and will be an asset in the future. After all, you wouldn’t want to pay for something for 15,20 or 30 years and find out that its not worth anything.

There are many things that can affect the value of a residential property and zoning is one of them. You can be in an area that is zoned for residential use but right next door is a factory zoned for industrial use. Even if there are other properties that have sold for a comparable amount, the neighboring property can bring your value down or create uncertainty of the future use of that property. Think about your home town and how it has changed over the last 30 years. Get the picture?

One of the items required for a conventional residential mortgage is an appraisal. The duty of the appraiser is not simply to assign a value to a residential property, but also to make comments on the neighborhood and note if the area’s use is stable or adverse.

A recent appraisal came into my office and it is in an area that the local government would like to see more industrial uses in the future. In fact, they publish a future use map for all to see before they purchase any property in the area. The appraiser marked the area as being in transition and residential use was interim. How long until the area becomes fully industrial is unknown, in fact it might never become devoid of homes, commercial and farms that are currently there, but the city has indicated that any new industrial uses in their impact area would go there.

This is a huge risk for any future buyers. You could buy a home in that area and years later, when you go to sell, you find your potential buyers unwilling or unable to get financing on your property.

In the end, our company had to pass on writing this loan. It was simply a risk that we were unwilling to take or let a client take.

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