Mortgage loan or refinance application declined? Now what? - by Kelly Kasparian

Kelly Kasparian, Birchwood Credit Services, Inc

Today’s mortgage rates are some of the lowest interest rates on record. The problem for many, however, is qualifying for those low rates. Borrowers are up against difficult and sometimes confusing lender requirements to qualify for those low mortgage interest rates.

In today’s lending environment borrowers have a 1 in 2 chance of being declined for a mortgage refinance application. The number is a little better for those wishing to purchase a home but still 30% of those borrowers wanting to purchase are denied. More stringent lending standards and the increasing regulatory pressures lenders are under to ensure borrowers are qualified for the loan they seek are to blame.

So what is a mortgage applicant to do when they receive a rejection notification for their mortgage application? First, never give up. There are steps you can take to improve your chances of a loan approval after receiving a mortgage loan denial letter.

Get all the information you can Find out why your application was rejected. You may receive a denial letter listing the reason(s) for denial but if that reason is general or vague, which it usually is, or if you do not completely understand the reason ask your lender to explain to you why you were denied. Ask as many questions as you can to get a clear understanding of the reason for denial. Discuss with your lender what they feel you need to do to be approved by their company.

Different lenders have different loan requirements Remember, a single lender’s rejection is not the final word. Different lenders have different lending requirements and applying at a different lender may produce a different outcome. Consider working with a mortgage broker who will have many lender programs that he or she can present to you.

You may be able to get help with your credit score If you are told that your credit score is too low to qualify for the lender’s loan program find out what score is necessary to qualify for the loan program you are seeking. Often just a few points increase on your credit score can qualify you for the lender’s loan program. Many credit reporting agencies offer rapid rescore and credit score maximization services which are designed to assist borrowers who have errors or other credit usage issues on their credit reports. When corrected or managed properly these services can increase a consumer’s credit score enough to qualify.

Ask your lender if they or their credit-reporting agency offer this valuable consumer service.

Watch that appraisal Sometimes credit related issues are not why the loan was denied. Appraisals of the property you are buying or refinancing may not be sufficient for the loan.  A new appraisal from another lender may solve this issue if the previous appraisal was lower than it should have been. Some appraisers may be unfamiliar with the neighborhood or may purposely be very conservative with the appraisal of your property or the property you are buying.

Don’t give up Keep trying. Working with a determined mortgage banker or mortgage broker who understands the lending and credit process can pay big dividends in your search for a mortgage loan. A knowledgeable loan officer will understand how credit scores, loan-to-value ratios and sometimes just a little more time can sometimes help you attain the goal of home ownership or a lower interest rate.

Kelly Kasparian is regional sales manager at Birchwood Credit Services, Inc., North Conway, NH