What to do When Your Mortgage Application Gets Rejected

Jayde Ferguson


Even though the economy and housing market both seem to be on the upswing, thanks to the financial crisis of a couple of years ago, lenders are being much more cautious than they used to be when it comes to lending. Because this is the case, more people may find their applications being rejected. If you have found yourself in this situation, it is important that you don't give up. There are certainly things that you can do to turn it around.

First things First - Why Was Your Mortgage Application Rejected?

According to Bankrate.com, approximately 30% of people who apply for a mortgage are turned down and close to 50% of people who apply to re-finance their mortgage are turned down. Different lenders have different reasons for turning people down. In fact, if you had applied to two different lenders with the same exact information, you might have been approved for one and denied for another. Finding out why your application was rejected is the first step to turning it around.

Generally, you will find that your application has been rejected because it fell into one of the following situations:

1. You Have Not Shown That You Can Save - One reason that mortgage applications are often rejected is because applicants have not shown the lender that they are able to save money. Ideally, the lender will want to see that you have saved at least 3 to 5 percent of the amount that you put down on the house. It will be even better if you have saved 10 to 20 percent. 

2. Your Loan is Not Serviceable - When it comes to loan serviceability, lenders will be looking to see if you are bringing in enough income to service the loan and if this income is stable. If you, for instance, just started a new job, even if you are getting paid well, it might not help you until you have been with your new company for several months.

3. Your Credit Isn't Up to Par - If your credit isn't fairly high, you can be confident that your mortgage application will be heavily inspected. Just one unpaid bill or a lot of activity can raise your chances of being rejected.

Moving Past the Rejection and Re-Grouping


Once you have taken a look at why your application may have been rejected, pull yourself up, brush yourself off and get ready to go again. Whether you realise it or not, the rejection taught you a valuable lesson about mortgages and finances. Now you can take this lesson and do something with it. Start the process by going right to your lender. Explain that you understand why the application was rejected and that you aren't asking them to re-consider at this point. Instead, you are looking for suggestions on how you can improve your chances the next time around. Most lenders will be happy to talk to you about this.

Things You Should Do before You Reapply for a Mortgage

1. Get Your Credit under Control


Did the lender tell you that your credit just wasn't good enough? If that's the case, work hard on improving your score. You have to realise that this isn't something that will happen immediately. Over a series of months, however, you can certainly improve your score. Many times, seeing it take a few bumps up will be all it takes for a lender to change their mind when they get your next application.

2. Put More Money in Your Savings Account


Your credit might be great, but perhaps you needed more savings. This is an easy fix for most people, as long as you are willing to keep stashing money away. Saving doesn't have to be difficult, and you will probably be surprised by how much you can save by putting your fancy coffee habit aside for a few months or giving up your premium movie channels through your cable provider. Making these small changes and putting the money into your savings account instead can make a difference when it comes to getting approved the next time around.

3. Try another Lender


Just because one lender has declined your application, that doesn't mean all of them will. For instance, one lender may have declined the loan because you haven't been with your job for nine months or more. Another lender, however, might only require six months. In some situations, you might not have to put much work into it at all and can simply choose a lender with less stringent requirements.

4. Check and Re-Check Your Application


You should also consider having someone else look over your application after you have filled it out. Sometimes having an extra eye can give you an advantage when it comes to being successful. It should be someone you trust someone who has gone through the experience before and if you know someone, choose someone who is familiar with the banking or mortgage industry. Buying them dinner or a couple of drinks in appreciation for their assistance is a small price to pay for a mortgage that is approved instead of denied. 

Quick Tips to Boost Your Chances

There are several tips above that can help you boost your chances at finding success with a mortgage application. For instance, try to find a lender that will give you pre-approval on the mortgage. You also might want to try putting more money down. Finally, it can always be worth a shot to go with a broker instead of a traditional bank. Whatever you do, have patience, and if you have to wait a month or a year before you can apply again, it's OK. Just use the time wisely and present something even better the next time around.


Author Bio


This article is written by Jayde Ferguson, who writes for Emerald Park Estate - part of Cedar Woods, and award winning property developer. Emerald Park Private Estate offers some of the best land for sale in Wellard.