If your loan has been rejected, it can be a tough situation to handle. You probably thought your were all but guaranteed approval; after all, you know plenty of people who were approved for a mortgage loan, and your finances, so you thought, are just as good as theirs.
Loan rejection happens all the time, and it’s a perfectly normal part of the mortgage industry. Fortunately, there are solutions. When you work with the right loan agent, you can get the service you need to increase your chances of loan approval.
While nothing can guarantee complete mortgage approval, an experienced lender can search for more options and find creative ways to get your loan approved.
The first step, however, is understanding why your loan was rejected in the first place. Once you understand the reason, you can start to address the issue and find viable solutions to the problem.
With that in mind, let’s take a look at some of the most common problems with mortgage applications, then explore possible solutions.
What to Do if Your Loan Has Been Rejected
Why Your Loan May Be Rejected
There is a variety of reasons why your loan may have been rejected, but these are a few of the most common, as well as some of the possible solutions.
Almost all mortgage loans use the convenient credit-score system to determine whether a borrower is eligible for financing. While this is far from a perfect system, credit scores give borrowers and lenders a simple and fast way to move through the application. However, if you have a low credit score, it will often mean that your loan has been rejected.
Fortunately, there are solutions. First of all, you could increase your borrowing potential by bringing a larger downpayment. If you have a large downpayment, some loans may be available when they are otherwise off limits. For example, if you have a 500 credit score, you could secure an FHA loan if you have a 10% downpayment.
Another issue, one that can be a little more difficult to fix, is having an income that is too low for the loan. There are other factors involved in mortgage approval, but your income is, for obvious reasons, one of the most important. The amount of money you earn has a direct affect on your ability to repay a loan, so lenders want to see exactly how much you make in a given month or year.
If your loan has been rejected because of insufficient income, there are a variety of solutions. The easiest is to simply look for a home at a lower price range. Instead of a home valued at $1 million, you may have to “settle” for a home worth $750,000. Another option is to increase your downpayment, which would reduce the total amount of borrowed money and thereby reduce the monthly payments.
Additionally, a quality lending agent can reduce your monthly payments by extending the loan terms. For example, if you have been rejected for a 30-year mortgage, we can look into a 40-year mortgage, which will reduce the monthly payments and may result in loan approval.
Lenders also want to know that your debts are not too high, as this can significantly increase your chances of defaulting on a loan. However, they do not look at the debts alone, but instead compare them to your income, using what’s called a “debt-to-income ratio.” Two people could have the same amount of debt and apply for the same loan, yet one could be rejected while the other approved. For example, if Alan and Bob both have $2,000 in monthly debt payments and apply for the same loan, but Alan’s income is $8,000 a month while Bob’s is $4,000, Alan is far more likely to be approved. This is because his $2,000 monthly debt payments only equal 25% of his monthly income, while Bob’s $2,000 payments are half of his earnings.
Essentially, it’s not the debt amount that matters, but how your debt compare to your income.
Like all loan-approval problems, there is a solution. For example, you may be able to secure the financing you need for an investment property by using future rental checks as income. This can be a complex process that involves a market survey, but if the numbers are right it could allow us to ignore other debts.
Appraisal Came Back Low
It might seem strange, at least to people not familiar with mortgages, that a lender or bank cares about the value of a home. After all, if the buyer and seller agree on a price, and the buyer can afford the mortgage payments, what’s the concern?
The concern comes from the fact that the property is collateral for the loan. If the borrower were unable to pay in the future, and the bank had to seize the property, they want to know that the property has a certain value. If this has been an issue in the past, there are possible solutions. For example, if you are refinancing, an FHA Streamline refinance does not require a home appraisal.
Let Us Help You Get Approved, Even After Your Loan Has Been Rejected
No matter what the cause, if your loan has been rejected let us help. We can’t guarantee approval, but we have a background for helping people who have been turned down by other lending institutions.
To help you get approved, we can use a variety of different options. For example, if you are looking to expand your investment portfolio, we could use future rent as your income. If you are having trouble with approval because you are self-employed, we have bank-statement loans that could help you get the right financing. From minimum downpayment loans to financing for large purchases, we can increase your chances of approval.
So if your loan has been rejected, you don’t have to accept the results. Contact our staff and let us try to get you approved for a top-quality loan.
Incredible Turnaround and Stellar Customer Service. Chad and his team helped us get into our first home here in San Diego. When we first started the process we were skeptical it would even be worth applying. But Chad and his team walked us through the whole lending process with integrity and know how that surpassed our expectations. After helping us to pull together our pre-qualification, he and his team stayed at the ready. Before we even walked up to a home we were seriously interested in he had the data we needed over to us and our realtor. After finding the home we wanted to place a bid on, we were able to place a bid with a matter of a few hours. Then, after having our offer accepted, he had our loan package completed and the keys in our hands in under a month — I am pretty sure it was less than. Like I said, incredibly fast and professional turnaround. if you are looking for a motivated lender who can walk you though every detail and have your back every step of the way, Chad and his team at HomePoint Financial is your best decision. Recommend them highly!”
I highly recommend Chad Baker. He does a phenomenal job and won’t trauma you or your clients. He has a whole team that works on the loans. And all the team members are great. He has a person that can translate for your clients that are Chinese. He is as good of a loan officer as you are an agent, and that is what you want when referring clients to a lender.
“This is the second time that I have worked with Chad (home purchase & refinance). He has become my subject matter expert and someone I depend on for all finance needs related to our home and real estate investments. My favorite things about Chad are his depth of knowledge, responsiveness, honesty and the great service he provides. I have referred countless friends and family of mine to work with him for no other reason than I know that he will treat them well and equip them for the best possible outcome. Chad will add tremendous value to any real estate transaction that you have and I am grateful to have him as a resource.”