Given the economic challenges, lenders have rightly become more cautious and have tightened the application procedure. So what should you do if a lender rejects your application for a home loan? (Photo : by Paul Kapischka / Unsplash)
The ideal of becoming a homeowner has grown more elusive for many prospective homeowners in recent years. The cost of buying a house has increased dramatically due to a combination of skyrocketing real estate prices and rising mortgage rates, pushing budgets to the breaking point. For instance, the average national house price increased from $327,100 in Q4 2019 to $417,700 in Q4 2023. Furthermore, the average 30-year fixed mortgage rate is now 7.30%, which is more than twice as high as it was a few years ago.
That being said, despite the particular difficulties of today, it may still make sense to purchase a property at this time. Since there may be less buyer competition while rates are high, now could be an excellent time to move. Furthermore, even though you might be considering holding off until rates drop, there's no assurance that this will occur very soon. In addition, if mortgage rates do ultimately drop, you always have the choice to renegotiate your home loan at a cheaper rate.
Even for those with excellent credit and steady jobs, getting accepted for a mortgage in the current market might be difficult. Given the economic challenges, lenders have rightly become more cautious and have tightened the application procedure. So what should you do if a lender rejects your application for a home loan?
Request in Writing the Grounds for the Denial.
Lenders are required by law to furnish you with a written explanation of the reasons behind the refusal upon request. This paperwork is necessary since it will help you pinpoint and fix the exact issues that caused the rejection. Get the explanations straight from the lender, so you know what to concentrate on instead of assuming you already know them.
Surprisingly, credit reports often contain errors and inconsistencies. Get your free yearly credit reports from all three main bureaus (Experian, Equifax, and TransUnion) and carefully review them if your application for a mortgage loan is rejected. Dispute any inaccuracies you discover with the credit bureaus and have them fixed or erased since doing so may greatly increase your chances of being approved.
Try to Raise your Credit Score
A poor credit score is often the barrier to getting a mortgage approved for many consumers. Take proactive measures, such as paying all of your bills on time each month, lowering the balances on your credit cards and other loans, and refraining from creating new credit accounts shortly, if your poor credit score results in the denial of your mortgage application. Your eligibility for a mortgage can be quickly increased by improving your credit profile.
