Are you applying for a new mortgage or a mortgage refinance? Unfortunately, it can be very depressing if you have applied for a new mortgage with the expectation of moving into your new dream home only to find out that the bank or financial institution has turned your mortgage refinance application down. All those dreams of a new home come crashing down in flames. But then, this need not happen if you get educated about how these mortgage issuers work and then do exactly as they want you to. So, what can you do?

Listed here are the five most common reasons why your mortgage or mortgage refinance application gets rejected - and some of these issues raise up right before you think you're about to the cross the finishing line and move into your new home. Avoid these five pitfalls and you will have better chances of getting your mortgage application cleared.

1. Low Credit Rating

Do you know the first thing a mortgage lender will do when you ask them for a loan? When you first submit a loan application, a lender will check your credit rating. Checking your credit report is quite easy for a mortgage lender. They can even get your credit rating from all the three crediting bureaus. If you have had a bankruptcy or a liquidation of assets, your mortgage application might be already shot. Even things like late payments can be too bad. Everything is checked - car loans, personal loans, credit card loans, etc. In fact, a lending instruction will go as far as evaluating how you paid back your student loans as they evaluate whether or not to approve your mortgage.

2. High Price of Property

Some sellers would peg a very high price on the property they are selling. This could be because of several factors like location, amenities, condition of house, etc. But the lenders might find such high prices quite unrealistic to finance for. If there's a property whose worth is just about 100,000 in the market, but someone is wishing to sell it for 500,000, then no seller would want to come forward to finance it. This is one more reason why mortgage applications fail.

3. Appraisal Value of Property is Low

This ties in with the above point, actually, but it is different. When you make a mortgage application, the lenders will send their experts to the venue to check out the property and to assess its market value. This step is called as appraisal. Many times, the mortgage application is rejected at appraisal because the value of the property is assessed to be lower than what is applied for.

4. Insufficient Funds in Bank Account

You are not going to get all the funding for the property from the mortgage. You will get approximately 75 - 95% of the property cost and need to make up the difference from your own assets. Plus there are the fees due at closing to consider. The lenders will dig into your bank account for these fees. If you do not have the right funds ready for them, they will reject. Many times a lender will look at your banking accounts and make the determination that you don't have enough in cash to cover your portion of the loan plus the charges for closing.

5. Too Much Debt

Reeling under too much debt is never healthy, and not at all in case of a mortgage application. Too many loans from too many other lenders, and another lender is not likely to want to burden you with another. Your level of debt can easily be see on your credit report.