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What to Do if you had a Home Loan Denied

Mortgage applications sometimes get declined or denied. If this happens to you, don't panic! Mortgage financing may still be available. In fact, you may be able to obtain a new loan with surprising speed.

Different lenders have different standards, and there are many FHA loan programs and other easy qualifying loan programs that you might qualify for. Where one lender looks at a loan file and sees a red flag, another might see green. For this reason, it's important not to take a loan rejection personally or consider it a black mark. Just re-group and speak with an alternative lender who can get the job done.

In some cases, lenders may have loan programs available that accept lower credit scores, and certain lenders have access to a wide variety of government loan programs not offered by other lending institutions.

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

Why talk to another lender if you’ve already been denied once?

Changing Requirements Loan requirements change all the time.  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 doesn’t qualify one day may very well qualify the next.

Quick Turnaround It used to be fairly common for loans to require 45 days and even longer to close. No longer is that the norm.  In many cases, loans can close in as little as 21 days. 

FHA Mortgages Why should people with basically good credit be hurt because their employer closed or they went through a few months of tough times?  The new FHA policy states that borrowers who encountered financial hardship because of the recession can apply for new financing in as little as 12 months.  This opens up the lending system to huge numbers of people who ran into financial problems and have re-built their credit.

Credit Scores When you apply for a mortgage these days, as part of your initial disclosures you should receive a disclosure listing your credit scores and key factors that affected your scores from your lender. The reason is that lenders are now required to disclose credit information received from the Credit Agencies, when they initially pull your credit even if they decline a loan. For borrowers who go to alternative lenders, the result is that each lender you authorized to pull your credit should each supply a disclosure showing your credit score and key factors affecting your credit.

Portable Appraisals In many cases, appraisals can be seen as "portable," meaning they can be transferred from one lender to another. Be aware, however, that appraisals for Conventional loan products are generally not transferrable. For government loans, like the FHA, appraisals may be transferred from one lender to another, however, there are time limit restrictions. Portable appraisals can be a big benefit for borrowers, especially those who have been declined for a mortgage. Instead of the cost and hassle of a second valuation, the borrower asks the first lender to send the appraisal to any alternative lender. If the appraisal meets all requirements, which it should, then the loan application can move ahead with greater speed than would otherwise be the case.

Finding the Right Loan Program The standards for one loan program may be slightly different -- or very different -- from another. Not all lenders have access to the same programs. This means lenders have the ability to offer different loan programs to a variety of different borrower, and the borrower can choose the right loan program which fits their needs. It also means that borrowers must find the lender with the programs that best match their needs and situations. If it doesn't work the first time, there is every reason to try again.

What could your mortgage look like?

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