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.
“Chad, Juliann and the team were great in helping me get through this process. It is not an easy process but they stayed with me the entire time and I am truly grateful. ”
My wife and I purchased a home in Escondido, first home together. Chad and his team made the whole process extremely easy and helped us close quickly. Will recommend to all friends and family!”
A very responsible and experienced professional with his highly effective team
I really enjoyed working with Chad Baker and the rest of the team. This was our first time buying a home in California and we started with unnecessary assumptions based on our previous experience as home-owners in a different state. Chad and his team were available throughout the whole process, explaining the state differences, answering all our phone calls and emails quickly and directly, and providing detailed weekly status reports so that all parties including agents knew exactly where we were in the process. Chad was very experienced and provided customized loan products for us to consider, which definitely facilitated our transaction. I recommend the Chad Baker team! ”