It can be discouraging if you’ve been denied a mortgage, but it’s not the end of the road. You can take steps to understand the reasons for the denial and improve your chances of getting approved in the future. First, ask the lender to explain why your application was denied. By law, they must provide you with a written statement outlining the reasons. Common reasons for denial include:
- Low credit score.
- High debt-to-income ratio.
- Need for sufficient income or assets.
- Reapplying with a co-signer
Consult With Mortgage Broker Vancouver
If you need help understanding the reasons for your denial or need help determining where to improve your chances of getting approved, consider consulting with Mortgage Broker Vancouver. They can help you review your credit reports, create a budget, and develop a plan for paying off debt or increasing income. They can also help you understand the mortgage process and your options for government-backed loans or other programs that may help.
Improving Your Credit Score
If your credit score was the issue, the first step is to check your credit report for errors. Dispute any inaccuracies with the credit bureau and work on paying off any outstanding debts to improve your credit utilization ratio. Additionally, try only applying for new credit or loans for a few months before reapplying for a mortgage, as each further inquiry can temporarily lower your credit score.
Reducing Your Debt-to-Income Ratio
If your debt-to-income ratio is too high, try to pay off or reduce some of your existing debts. This will help lower your overall debt-to-income ratio, making it more likely that you’ll be approved for a mortgage. Additionally, review your budget and try to cut down on unnecessary expenses to help free up more income to apply towards your debt repayment.
Increasing Your Income or Savings
If your income or savings were deemed insufficient, consider ways to increase them. This could include taking on a higher-paying or part-time job, starting a side hustle, or finding ways to boost your savings. Additionally, if you’re applying for a government-backed loan, like an FHA loan, you can get approved with a lower down payment if you have a strong co-signer with a good income and credit score.
Reapplying with a Co-Signer
If you need help getting approved, consider reapplying with a co-signer. A co-signer, such as a parent or close family member, can help you qualify for a mortgage by adding their income and credit history to the application.
It’s also important to note that a mortgage denial does not mean you can never apply again. The economy and financial situation are dynamic, and the different bank has different policies. You might qualify for a loan from another lender even if you were denied by one. And it’s always wise to shop around and compare rates from multiple lenders before applying for a mortgage.
Government Loan Options
- FHA Backed Loans
Another option to consider if you were denied a traditional mortgage is a government-backed loan, such as an FHA loan. The Federal Housing Administration insures FHA loans. They are designed to make it easier for first-time homebuyers or those with lower credit scores to qualify for a mortgage. FHA loans typically have more lenient credit and income requirements than conventional ones and may also allow for a more down payment.
- VA Loans
Another government-backed loan that can help you achieve homeownership if you were denied a conventional mortgage is a VA loan. VA loans are guaranteed by the Department of Veterans Affairs and are available to eligible active-duty military personnel, veterans, and their surviving spouses. Like FHA loans, VA loans typically have more lenient credit and income requirements than conventional loans.
Keep in mind that Government-backed loans may come with some restrictions, such as a cap on the loan amount, and also may require specific qualifications and certifications, such as a certificate of eligibility. It is wise to check with the lenders and research before applying.
Get Your Mortgage Application Approved Now
If your mortgage or mortgage refinancing request is denied, the first step is to remain calm. There’s always a way to resolve the issue. Need to purchase a home or apartment as quickly as possible, then choose private lenders or credit unions to finance the purchase. If you have the time, you can work on improving your financial situation before applying for a mortgage.
If you’re trying to know what you should do when your mortgage application has been denied, then discuss your case with Mortgage Broker Vancouver. We have assisted thousands of borrowers across Vancouver to get their required loans. We have a network of lenders across the province to locate lenders who will approve your application. Don’t let your dream home slip away.