Getting turned down on your mortgage application is no reason to give up. Ask yourself the right questions and see where it went wrong. There are steps to take than might help you finally get a nod on your next try.
It’s easy to lose your spirit after your mortgage application gets turned down once. That doesn’t mean you should. If you get denied, the wise thing to do is ask why you didn’t get it in the first place. Is there anything you can do to make it right and get the loan after another shot?Get today’s mortgage rates!
Step 1: Identify the why.
Finding out why you got turned down requires no major effort. Under the Equal Credit Opportunity Act, lenders are required by law to disclose to the applicants the reason/s for denial. This should be done in writing and given to you within 30 days after turning down your application.
In this letter, you will find the following vital pieces of information:
- The specific reason/s for why you got denied
- How you can take action to mend such issues
- Name and address of the credit reporting agency if the reason for your denial involved a credit report
- The lender’s contact numbers which you can use if you don’t understand the content of the report
- Contact number/s of the federal agencies that you should go to if you believe your application has been treated discriminatorily
Step 2: Correct your errors.
There are various possible reasons why your lender said no to your application.
It could be that you have insufficient income to afford the mortgage payments, don’t have enough cash reserves for the down payment, or have too much debt on your name.
Another probable cause is a low credit score. Most conventional mortgages require their borrowers to have a minimum credit score of 620.
Or, another reason is lender error. Though it’s an off chance, these things do happen.
Whichever got you the lockdown, the important thing is to take action. If you have insufficient income, you can apply for down payment assistance programs or low down payment mortgages that have lenient qualifications and competitive interest rates.
If your credit score is low, you might want to check your credit report and inspect for errors. Or, you can take some time first and build good credit if you can afford to delay.
If the error is found to be on the lender’s end, then you’re in luck. Such errors are the easiest to fix. Just forward the necessary documents to correct some underwriting errors.
Step 3: Get a second opinion.
After you’ve corrected your errors, it is now time to forward your application for reevaluation. If you have questions, don’t hesitate to ask your lender. Lenders also have a second level of review for loans – something that you might want to consider.
Step 4: Apply again.
If, for some reason, your application still got denied after another round of evaluation, the best move is to keep shopping. Mortgage programs today have evolved to cater to a variety of borrower needs so not meeting the standards of one program does not automatically disqualify you in another.
Before you do that, you should first establish the following facts:
- What you want in your loan
- How much can you afford
- What fees are charged
- Is it the right time?
- Are you ready?
Being honest with yourself and your financial capacity is a crucial factor in getting approved.Click to See the Latest Mortgage Rates»