What to do after being rejected from your mortgage application?

What to do after being rejected from your mortgage application?


Article contributed by Brentt Taylor

About 30 percent of mortgage applications are rejected, with thousands of hopefuls being denied in any given year. Some of the main reasons why mortgage lenders would reject applications are:

Income issues: The most common reason for being rejected is not having enough income for the amount that they want to get for a mortgage. It is also possible that issues with a spouse’s credit history can come into play; if the credit is too poor, then the lender cannot consider any of the money that the spouse wants to provide as part of the mortgage.

Credit history: Depending on the lender one speaks with, the cut off for mortgage qualification is somewhere between 620 and 660. With around a third of the American population currently have a credit score below this, it means a large majority of Irish also do not qualify to get a home loan. Even with the right credit score, having a foreclosure, late payments on the home, a short sale or a bankruptcy could make qualifying impossible.

Home condition issues: Transactions with homes that are falling apart are also breaking apart considering how many homes are distressed and how many sellers can barely break even. When the appraiser mentions a home is missing key electrical items, missing appliances, broken windows, cracked windows, water damage or wood rot, lenders often become unwilling to finance these problems.

So what can rejected applicants do after getting the bad news? The absence of a seal of approval doesn’t mean it’s the end of the journey; there are steps to take. Detailed reasons for rejection can be sought and, if you feel hard done by, appealed.

Speaking with the loan officer and finding out how close the decision was can help too; it is possible that another appraisal or a little bit more cash for a down payment will tip the decision in the applicant’s favour. In this case, borrowing from a relative or selling off an asset can help finance a home.

First time buyers who have been rejected for an application might need to scale back on what they want in a home. Seeking out a home that one can actually afford can increase odds of acceptance.

Some people may find credit unions to be more in their favour as well.

Those with poor credit need to spend time bettering it by paying on time and paying off all debt. This can raise your credit rating score enough to the better side of a mortgage application.

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