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Top 6 reasons to decline your mortgage loan

Reasons to decline your mortgage

Our risk analysts and private lenders may decline your mortgage for various reasons. Here are the top six reasons and some helpful tips on what to do if your loan application is rejected.

1. Over 50% Loan to Value (LTV)

Most private lenders avoid lending over 50% LTV due to the high risk involved. A loan at 50% LTV is considered borderline. The lenders we work with do not intend to foreclose on your home, as it is the worst-case scenario. Foreclosure leads to additional costs and delays, and the lenders’ funds are tied up, only earning interest once the process is complete. Therefore, they stay away from loans with a high risk of foreclosure.

Our internal property valuation may not match your self-reported valuation. We assess the property value based on property values in the area to reach a “quick sale” property valuation as a reference. If the loan amount you requested is being declined, please review the amount you need. Additionally, some prospective borrowers add more collateral to their loans to get approval, which we continuously consider.


2. Unsuitable Location

Private lenders prefer loans in the Central Valley (Gran Área Metropolitana – GAM) and attractive tourism areas such as Jacó, Manuel Antonio, Santa Teresa, and Guanacaste beaches. These locations have higher liquidity, which means quicker sale potential. Private lenders avoid owning your property and prefer to lend in places where they understand the market.


2. Title Issues

Title issues, such as pending foreclosures, liens, or lawsuits, can lead to the rejection of your loan application. Lenders want as few unknowns as possible before they invest their money. If there are any title issues, please address them adequately or provide documentary proof of how they can be addressed before closing.


4. Site Visit Issues

When our risk analyst finds out that a prospective loan is worth seeing, we schedule a site visit to assess the loan’s viability to our lenders and get to know you. This visit is to view the property in person. Sometimes, your loan may be declined due to inaccurate photos, wrong location, or apparent issues that must be clarified during the initial evaluation.

The appearance and cleanliness of your property are vital in determining whether a loan will be presented to our private lenders. Remember, you only get one chance at a first impression!


5. Second Mortgage

Private lenders only offer first mortgages and do not lend on second mortgages. However, if there is already a mortgage on the property, most of our lenders are open to financing, including paying off the mortgage, provided it meets the rest of the requirements.


6. Raw Land – No Significant Construction

No Significant Construction Private lenders do not lend on raw land, even for a construction loan where the loan is assessed on Future Value (the property’s value after construction is complete). A few rare exceptions exist, such as ultra-desirable locations with a meager Loan to Value (under 10% – 20% of our land value assessment).

In conclusion, these are the top reasons your mortgage application may decline. Be sure to address any issues before applying and present your property as best as possible. Remember always to make an excellent first impression, as it can impact your chances of approval.

-Written by Glenn Tellier (Founder of Grupo Gap)



*Loan Request Form

    Your Information

    How Did You Hear About Us?


    Referral Name:

    Your Name:

    Your Email Address:

    Your Phone (if possible, include both home and mobile numbers)

    Loan Request

    Amount Requested:


    Use of Funds:

    Collateral Property Details

    Property Location: Please include Province, Town, and District

    Approx. Land Area: (pick square meters or square feet)

    Approx. Construction Area M2: (pick square meters or square feet)

    Property Value:


    Property Description: Please include the age and condition of the property

    What is/are your Land Survey (plano catastrado) or Lot number(s)? (optional)



    Frequently Asked Questions

    What is a mortgage loan?

    A mortgage loan is a loan you take to purchase a property. The property serves as collateral for the loan.

    How do I apply for a mortgage loan?

    You can apply for a mortgage loan through a Gap Equity Loans. You must provide information about your income, and the property you want to buy.

    What is pre-approval?

    A pre-approval is when a lender confirms that you are eligible for a mortgage loan based on your credit score, income, and other financial factors.

    What is the difference between a fixed-rate and an adjustable-rate mortgage loan?

    A fixed-rate mortgage loan has a fixed interest rate for the entire loan term. An adjustable-rate mortgage loan has an interest rate that can change over time.

    How long does the mortgage loan approval process take?

    The mortgage loan approval process can take anywhere from a few days to several weeks, depending on the lender and the complexity of the application.

    What happens if I miss a mortgage loan payment?

    If you miss a mortgage loan payment, you may be charged a late fee, impacting your credit score. If you continue to miss payments, the lender may begin foreclosure proceedings.

    Can I pay off my mortgage loan early?

    Yes, you can pay off your mortgage loan early. However, some lenders may charge prepayment penalties for doing so.

    What happens if I sell my house before paying off the mortgage loan?

    If you sell before the mortgage loan is paid off, the proceeds from the sale will go toward paying off the remaining balance.

    What should I do if my mortgage loan application is declined?

    If your mortgage loan application is denied, could you ask the lender for specific reasons? You can then work on addressing those issues and try again with a different lender if necessary.



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