Mortgage denied? What to do next

Why do mortgages get denied?

• Debt-to-income. Monthly debts plus the new payment are too high for your income.
• Credit. The score is below the program's minimum, or there are recent late payments or collections.
• Income the lender can't count. Too short a history, or income that's falling or hard to document.
• Money to close. Funds that can't be verified, often because of an unexplained deposit.
• The property. A low appraisal, needed repairs, or a condo or property type the program won't finance.

What notice should I get if I'm denied?

Under the Equal Credit Opportunity Act, a lender has to tell you its decision within 30 days after receiving your completed application. If it turns you down, the notice must give the specific reasons or tell you that you can ask for them. You have 60 days to ask, and the lender then has 30 days to answer. Ask: the reasons are your road map.

Can I get a free copy of my credit report?

Yes. If the decision was based on your credit report, the notice must name the credit bureau and tell you that you can get a free copy from it within 60 days. You can also check your reports for free any time at AnnualCreditReport.com. Look for mistakes, like an account that isn't yours or a paid debt still showing as unpaid, and dispute them with the bureau.

Why would I be denied after I was pre-approved?

A pre-approval is based on what you shared at the start. Common reasons a file falls apart later: a new car loan or credit card, a job change, a drop in overtime, money that can't be documented, or an appraisal that comes in low. Keep your finances steady until closing and tell your loan officer about any change right away. The what happens after you apply guide covers the steps.

What should I do next?

• Get the reasons in writing and your free credit report.
• Fix what you can. Correct errors, pay revolving balances down and avoid new debt.
• Check other programs. One lender's limit isn't everyone's. FHA, VA, USDA, NH Housing and conventional loans have different rules, and lenders add their own. As a mortgage broker, Elite Mortgage Group can look at options across many lenders, though approval is never guaranteed.
• Consider a co-borrower whose income and credit can be counted. See co-borrowers and co-signers.
• Give it time when the issue is a recent event like a bankruptcy; see waiting periods.

Does a mortgage denial hurt my credit?

The denial itself doesn't appear on your credit report. The credit check the lender ran does show as an inquiry, which can lower a score slightly for a while. What matters more is fixing the reason for the denial before you apply again.

What if I think the denial was unfair?

Lenders can't deny you based on race, color, religion, national origin, sex, marital status, age, receiving public assistance or exercising your consumer credit rights, and the Fair Housing Act adds more protections. If you think a lender treated you unfairly, you can file a complaint with the Consumer Financial Protection Bureau.