Mortgage Denial - Why Mortgage Applications Get Denied
Mortgage applications are denied when they do not meet the guidelines of the specific loan program that was applied for. There can be any number of reasons for not meeting guidelines including a credit score being too low, the debt to income ratio (the amount of debt payments relative to monthly income) being too high, not having enough money saved, or not having enough equity in the home. It can be both disappointing and frustrating to learn that your mortgage application was denied, but you don't have to give up at that point.
What to do if you are not approved for a mortgage loan
When issued a mortgage denial, your first step is to find out exactly why the application was not approved. Your mortgage consultant will provide you with a Statement of Denial (also sometimes called an Adverse Action Notice) explaining why the loan was denied. If it is related to a specific guideline there may be another program that is not so restrictive. For example if you have a low credit score there are many loan programs you will not qualify for, but American Financial Resources has a special low credit loan which allows scores down to 600 in some cases. You should also request a copy of your credit report so you can check for any inaccurate information which could be lowering your scores.
If you weren't approved to borrow the amount you hoped for you may be able to lower your budget slightly and get approved for a lower loan amount. You may also choose to save for a period of time and then reapply once you have more money available in reserves. Other ways to improve your credit worthiness include paying down debt, and most importantly paying all bills on time every month. Even one late payment can lower your scores and be seen by any lenders you are applying with. (If you do inadvertently end up with one late payment after a long history of paying on time it is worth calling to see if the company will waive it and not report it. Many creditors are willing to grant this courtesy to their customers and it never hurts to ask!)
It is important to note that the guidelines on mortgage programs can change at any time, so if you are denied for a specific reason and correct it there is no guarantee that a subsequent application will be approved. Still, it is helpful to know in general what a lender is looking for, and by working closely with an American Financial Resources mortgage consultant you can improve the chances that next time around you will hear the words "you are approved!"
Learn more from American Financial Resources
To find out additional information about the mortgage process, contact an AFR loan consultant at 800-316-9508. You can also request a quote or get started online.
Last Updated: August 22nd, 2011 9:16 AM CDT