- Posted April 25, 2014 by
What To Do If Your Mortgage Application Is Denied
It can be disheartening to have your mortgage application denied. Lenders are legally required to provide you with the reason for the denial. They are also required to name the credit bureaus which they used in order to make their decision. Here are a few things to look into if your mortgage application is denied.
Obtain Your Credit Report
Obtain a copy of your credit report from all three reporting agencies; Equifax, Experian and Transunion and check it for errors. Is your personal information accurate? Is your credit history being reported accurately? If there are any inaccuracies you can file a dispute. The bureau will contact the creditor in order to verifiy the information and is legally required to send you the results within 30 days.
Unfortunately, accurate derogatory information will remain on file for 7 years from the date of last activity. If there are derogatory items such as collections or charge-offs you may want to contact the creditor and ask them if they can remove it out of goodwill. They aren't required to do so if the information is correct but in some cases they will; it's worth a try. Some loans are denied due to the applicant having a low credit score. Credit scores are based on your history and cannot be disputed; however you can dispute items on your file if they are inaccurate which will in turn affect the score.
Too Much Debt
Some mortgage loans get denied because due to a large number of open accounts or balances. In this case you may want to contact the creditor and close out accounts which you no longer use. You can also pay off existing debt before reapplying for a home loan.
Stability Is Key
Mortgage lenders generally want to see stability; most prefer two years of employment at the same place of business. If you are self-employed you may have to provide the lender with tax returns or bank statements as proof of income.
Try A Different Lender
Not all lenders have the same requirements. Shop around but be careful about applying at a large number of lenders; too many inquiries or credit checks can negatively affect your credit score. Talk with the lender first in order to find out their general requirements to see if it is a good potential fit.