What to do if your mortgage loan application is denied?

mortgage application declined

Don’t lose heart if your mortgage loan application is denied. There are ways and means to circumvent this problem. Depending upon the situation, your lender may offer you a different program. It is even possible that the lender does approve the loan, but with some changes in it. 

If this does not happen and you are totally rejected, the first thing to be done is to find out why it were so. This is not as difficult as it may seem since lenders are, as per federal law, bound to tell you the reason for credit denial. Also, the law, which is termed the Equal Credit Opportunity Act, lays down that all lenders and credit providers have to give the reason for their refusal. In addition, this is to be given in writing and in a time period of one month after issuing the red signal. These reasons need to be very clear cut and have no ambiguities in them. If a credit report is the main reason behind this refusal, they even have to supply the name of the credit reporting agency. 

Also, if the reasons for the refusal can be corrected, then the person concerned can correct them and re-apply for the loan. Very often, insufficient income is the primary reason behind loan refusal. If such is the matter, send in another application for a loan program which is specific to low to moderate income borrowers. In this manner, you can even get an advantage by the lesser amounts of down payment which will have to be made. The FHA and VA loans are designed very specifically for low to moderate income borrowers. 

In addition, do try to re-negotiate the terms of the purchase with the seller. If you get the purchase price cut by a bit, you will also be able to lessen the volume of the loan you need. Try making an add on down payment, not regarding the down payment you have given earlier on. This extra value will bridge the difference between the appraised amount and the purchase price of the land or house. One can even get the appraised value re-examined. Mistakes enter these processes time and again. Getting a reappraisal done will not harm anyone. 

At times, a poor credit report card is the main reason for loan refusal. Go through these details under a microscope. Very often, there is some bad history in your credit lineage. But, this is no more the case. Clarify this point to the lenders. There are instances of billing errors in your credit report. These could be errors in the math involved in the process. Go through the fine print of the script and check out for these. Send in a letter to the credit reporting agency with the errors highlighted so that these can be cross checked and corrected. As per the rules of the Fair Credit Billing Act, creditors have to correct errors a.s.a.p. without taking extra charges.  

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