Getting your mortgage application denied is dispiriting, but that doesn’t mean you’re out of the race. When you know why your application was denied, you can take steps to remedy it.
Here are some common reasons a mortgage application may be declined:
Proof of income is a very important part of applying for a mortgage loan, as it shows the seller that you have the funds to make a purchase. You not only have to have the funds, but you must be able to access it and have the legal right to use it. Provide your lender with your bank account information and they should let you know if anything else is needed to verify the proof of funds.
Credit is essential to our lives today but too many credit checks at once can possibly appear as poor money management in the eyes of lenders. For example, don’t apply for credit to purchase new furniture for your new home just yet. Too many applications can also lower your credit score, so only open new lines of credit if you absolutely need it.
A poor credit history is one of the most common reasons an application is denied. When this occurs, work on raising it before applying again. This can be done by:
Mistakes or inconsistencies in your application can cause it to be denied if they aren’t fixed. Before submitting your application, double check all your information for accuracy. If a mistake is present, contact your lender to get it updated. Under the Fair Credit Reporting Act, “both the credit reporting company and the information provider are responsible for correcting inaccurate or incomplete information in your report.”
If you’ve recently lost your home to foreclosure, there is a mandatory waiting period before you can apply for a mortgage again. If you apply before that time is up, you may find your application declined. The typical waiting period is two to seven years, though there are times when the period can be shortened or waived. Talk to your lender about your options.
If you were denied for a mortgage but your have the income and credit history to support a loan, it may help to get a second opinion, or ask your current lender if there are other loan programs you might quality for. Get as much information as you can from your lender about your rejected application. Make a plan to correct the issues and you can apply again with a better chance of approval.
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