Denied a mortgage? Don't get mad — get approved

Your mortgage rejection may have little or nothing to do with you, experts say. Trying again may be the best move.

By MSN Real Estate partner Jan 2, 2014 9:53AM

 © Vstock, Tetra Images, CorbisBy Brian O'Connell, MainStreet


Home-mortgage applications were down 6.3 percent in the final full week of December, according to the Mortgage Bankers Association, and mortgage-refinancing applications were down even further, sliding by 8 percent.


"Following the Federal Reserve's taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest levels since November 2008," says Mike Frantantoni, the MBA's vice president of research. "Purchase application volume were weak too, continuing to run more than 10 percent below last year's pace."


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It could mean a bigger window of opportunity for homebuyers or homeowners looking to refinance.

But what if you apply for a new mortgage and get denied? After all, there is no guarantee you'll get approved your first trip to the plate.

The important thing? Just keep swinging, mortgage experts say.


"Different lenders have different standards," said Ray Brousseau, executive vice president with Carrington Mortgage Services, a Santa Ana, Calif., mortgage lender. "Where one lender looks at a loan file and sees a red flag, we might see green. For this reason, it's important not to take a loan rejection personally or consider it a black mark. Just regroup and speak with a replacement lender who can get the job done."


Brousseau offers some pointers for mortgage applicants coming out of a denial:

First, you're more ready than you think. Go ahead and jump right back into the mortgage market — you have everything you need to try again.


"When you submitted your first loan application, it took some time to pull together the necessary documents and forms," Brousseau says. "Now you have those materials in hand, and you have a current and usable appraisal that a replacement lender can consider. The result is that you may be able to breeze through the underwriting process with a second lender a lot faster and with a lot less hassle than the first."


Ask about credit. If a low credit score is an issue, ask multiple lenders if they have special programs for low-credit mortgage applicants. Many lenders (Carrington is one) have such programs in place.

It might not be about you, specifically. Loan requirements have lots of moving parts and change frequently. That means you can get rejected today and accepted next week based on changing loan requirements.


"Loan requirements change all the time," Brousseau says. "This happens because investors enter and leave the mortgage marketplace on a constant basis, so there are always new programs with new guidelines to consider. The result is that a borrower who does not qualify one day may well qualify the next."

Don't take on any new debt. Brousseau advises not taking out any new loans or credit while you're going through the mortgage-loan experience — especially if you've been denied a mortgage already.


"When a loan is declined, it's extremely important for borrowers to create a financial 'quiet period,' a time in which they do not make major purchases, increase credit balances or open new credit accounts," Brousseau says. "Financial quiet periods can help borrowers avoid sliding over debt limits during the application process."


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Tags: loans
Jan 6, 2014 2:44AM
all of you need to watch the documentary "inside job" 2010

Jan 5, 2014 8:02PM
buy within your means.  buy low, pay off and own free and clear.
Jan 5, 2014 4:23PM
NO.....How about not applying for a loan in the first place and make some imbecile banker wealthy and you poorer paying on property that you really don't only own that rights to live at the address attached stop paying your taxes and see if you really own it.
Jan 5, 2014 4:09PM
Denied health coverage  ..forget It ..denied mortgage, try again?  ..Denied your freedoms!! I think Obama's intentionally tryin to start a revolutuion!!  
Jan 5, 2014 3:52PM
duh  its  gonna  be  harder  to  get  a  mortgage  in  2014... don't  you   dumba--es  know  about  the  rule  changes   for  this  year  more  money  down....    the   income  multiplier  is  reduced.....  these  and  other  changes  in  the  rules  outta  give  the  housing  market  a  kkick  in  the  a--  (sarcasm)
Jan 5, 2014 3:50PM

I was surprised at the quantity of information required.  Some of it indicates increased review which makes sense.  Other items serve no purpose I can see, save proving the person I'm dealing with is incapable of thinking or not allowed to make decisions.


It is interesting.

Jan 5, 2014 3:35PM
Giving high  loan amounts  to people who could not really afford them is what started this whole housing debacle!  Will they never learn? If you are denied a loan it is for a good reason people.  Live within your means and stop trying to keep up with the Jones! Smh......
Jan 5, 2014 2:56PM
One of the worst things in trying to get a mortgage is to own or want to finance a manufactured home. This is what my last residence in the US was. There are so many  Mfg'd homes in Oregon and if you can own one , why can't you get financing as readily as any other home ? We had GMAC when we bought the property in 2000. Due to my husband's gambling habit, we needed to Refi and got another loan. Months before he passed away in '09, he decided to Refi again to pay off credit cards. We went to our local bank and the woman who was  in charge gave us a home equity loan instead.The interest rate was incredibly high at 12.9, so I said 'no'. My husband threw a fit, and with his heart condition I was forced to accept it. We had a credit score of 736 and after his passing ,I got a modification. This manager proceeded to ruin my credit, with lies that said I was behind in payments. When I questioned her, she said she had a right to give this info to the credit bureau, because I was making payments that were less than the originally agreed amount. They had accepted the modification, so that should have been a moot point. I'm still paying 8% plus taxes and  homeowner's insurance. One of my  biggest regrets is opening an account at US Bank. Something really needs to be done about both the banking system and the credit bureaus.
Jan 5, 2014 2:49PM
Don't worry, Obama will steal money from me so you can have a home you did not earn.
Jan 5, 2014 1:40PM
Get Pre-approved. Saves hassles and its a reality check for people trying to over-buy.
Jan 5, 2014 1:23PM
I would say No means No.  If you don't don't qualify.  It seems that someone has forgotten the past already.  Buy what you can afford and move up with your income.  Everybody trying to buy a dream home on a dream salary.

Listen, the banks said I was NOT worthy for  getting a mortgage so I went on the private market and got a five yr 5% mortgage for 100K.

Paid the thing of in under 4 yrs, now they want me get all kinds of stuff from them, NEVER again with an AMERICAN government sponsored thieving program.

Got an Indian finance mortgage and bank account and am doing just fine.

Screw American thieves/banks.

All I do now a days is live in this country all my banking and other financial issues are done outside of the United States.

Everybody in the banking sector seems to forget one big thing, IT IS OUR MONEY YOU MESS WITH NOT YOURS.

Jan 5, 2014 12:59PM
Is the same true if you are denied a home equity loan?
Jan 5, 2014 12:55PM
If you file for insolvency with the IRS to discharge a portion of your federal taxes as opposed to filing bankruptcy does your credit score take a hit?  If so, what are the ramifications of filing such a document.  How does filing for insolvency dilute the opportunity to secure a mortgage?
Jan 5, 2014 12:48PM
this doesn't make any sense
there is a specific reason to why you get denied for a mortgage


Jan 5, 2014 12:41PM
Or buy a house you can actually afford ?
Jan 5, 2014 12:26PM
the best thing that ever happened to me was never getting a credit card and never getting a bank mortage the banks did me a favor---screw them all frank
Jan 5, 2014 11:48AM
I was denied because I had started "foreclosure on my house"  It sold the day I put in for sale and the foreclosure didn't happen and they got their money and I only missed two total payments.  My credit was fine but they wanted me to wait a total of two years and come back with 10 percent of a down payment before I asked for a house loan again.....
Jan 5, 2014 11:42AM
People with descent credit and a descent income are being denied, these banks want to make it impossible for people to get financed, thousands of people lost their jobs and their homes thanks to our overspending greedy government that stuff their bank accounts with our money. Obama sends billions of dollars his Muslim brothers who attacked this country and we got in the forever war that ruined this countries economy.. Now the house prices jumped up again and so did ev everything else. My son is a real estate agent and he sees people being denied even though they make enough money and their scores are above 600. Ther all a bunch of crooks who work hand in hand.
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