It can happen to anyone: you go through the process of filling out a mortgage application, only to be turned down. The good news is that being turned down is not the end of the process. In many cases, it is possible to resolve the issues that led to your mortgage application being rejected.
Here are some steps you can take to move forward after being denied for a mortgage loan:
Find out why you were turned down
The first thing to do when your mortgage application is rejected is to find out why. In most cases, the mortgage lender will provide you with a specific reason that your mortgage application was denied. It is important to know why your application was turned down so that you can address the problem more effectively.
Work on the problem
The next thing to do is to work on the problem that resulted in your mortgage application rejection. If the problem is your credit score, take steps to improve your credit score ― you may need to make on-time payments or fix errors on your credit report. In some cases, lenders may be concerned about your debt load or the size of your down payment. These are issues that can be addressed. You may also need to consider reducing the amount of money you are requesting for your mortgage loan.
Re-apply
In some cases, you can work with a mortgage lender or broker to modify your mortgage application and/or re-apply. Once you are confident that the deficiencies in your mortgage application have been repaired, you can attempt to get your mortgage application approved again. Some lenders will work through the issues with you to help you obtain approval.
You can also simply try applying with a different mortgage lender. Different lenders generally have different requirements. If you look around more, you may find a mortgage lender (and mortgage program) that fits you better. [See: How to Find the Best Mortgage Lender]
Increase your chances of approval
In order to increase the chance that your mortgage application will be approved, you should sit down with a prospective mortgage lender before beginning the application process. You can share your financial situation and get a realistic idea of your chances, and find out what you can do to improve them.
Additionally, you may decide to get pre-qualification or pre-approval for your loan. While they do not guarantee that your mortgage application will get final approval, they can help you get on the right track.
Preparing in advance can help you save time and effort, and increase the chances that you will make it through the mortgage application process with success.