Mortgage Rejection – Help For a Denied Mortgage Loan Application

This is an easy-to-read article about what you can do if your mortgage is rejected. I'm not a lawyer and a lot of this article discusses just the basic, general advice I can give based on Federal US law. Consult an attorney to find out additional rights or limitations you may have in your state or country. This is just a starting point from which you might consider alternative methods of dealing with your mortgage rejection.

If the lender makes a counteroffer (e.g. higher interest rate or smaller loan) your loan application is not technically rejected yet. Many of these protections only apply if you deny the counteroffer. Consider your options carefully as the counter might be amenable to you!

Within 30 days of your application, the lender is required to do a lot of things. The lender has to

• make a reasonable effort to gather relevant information

1. the appraised value of the property in question
2. your credit history
3. your income
4. stability of your income and employer

• give you a written answer if you are rejected

If a lender fails to do this, it may be grounds for legal action and you should contact an attorney.

When an application is rejected, the lender is legally required to deliver this decision in writing. If you have been flat out denied, you should immediately ask for the specific reasons for the rejection. As long as you make a formal written request within 60 days of the application, the lender is often legally required to tell you exactly why your application was denied. They have to be very specific. Saying "You didn't meet the minimum requirements" is too vague and they are legally required to give you a more specific answer like "Your salary was too low." or "The loan to value ratio was too great."

If the reason for rejection is a bad credit history, you have a legal right to know the name, address and phone number for the consumer reporting company that the lender used to get your credit report. This company will provide you with a free copy of your credit report as long as you make a written request within 60 days of your application. If you wait too long they can charge you a nominal fee (like $10). If there is incorrect information in the consumer report, you can dispute the claim and the company has to launch an investigation. If another company is furnishing the disputed information to the consumer reporting company, they also have to investigate. If these investigations lead nowhere, you can place an explanation of the disputed claim in your credit report.

Another reason your loan can be rejected is a low property appraisal value. If the lender appraised the property you want to mortgage, you can get a copy of the appraisal from them. Make sure the appraisal is accurate. It's hard for a nonprofessional to do this, but you can at least check objective things like square footage, number of bathrooms, any damage, etc.

You also need to make sure that the appraiser didn't use any illegal standards like the racial composition of the neighborhood or the religious beliefs of the building's tenants. If you think anything in the appraisal is suspicious or sounds like coded discriminatory language (I heard a realtor say a building was "not near any KFCs" which I didn't immediately realize was her way of implying that this particular neighborhood was racially homogenous!!).

You're allowed to resubmit! You don't want to apply for more than a few mortgages in a span of several months because that will set off its own set of red flags in the lenders' computers. But as long as you have only been denied once or twice, you can strengthen the weak points of your mortgage application and resubmit.

Bookmark this page today (hold down the CTRL key and press D and you'll be able to visit this website any time because it will be in your bookmarks file at the top of the screen), and try to work on each of these steps a little bit each day. You have to keep copies of everything you've written to the lender and everything you've received back as they may be very important in resolving (or avoiding) a dispute.

Managers recognize when people hold on to documentation and strengthen the weaknesses in their application, and this may play a role in their decision process. They want to avoid conflict and legal entanglement as much as possible, and a borderline rejection might turn into an approval just because the manager knows you've organized yourself well. Ask the right questions and always keep copies of your correspondence.

There are many ways to get advice about mortgage applications in the future. Don't go in unprepared. With the right counsel or access to the right piece of software, you can know whether or not the mortgage application will be approved before you ever submit it.

Banks are just using calculations based on pretty well-established formulae, and a professional or a professional tool with the right training can often approximate their decision based on current market trends very well. Consider getting pro help!

Some loans get special considerations that other loans ignore, so you want to find somebody who knows what they're doing. Often times, there are Federal bureaus designed to refer you to an attorney that specializes in this field. You can also call your state bar and they will refer you to a lawyer. That lawyer may charge you a fee for consultation, but that one-time upfront fee might be the difference between being a homeowner and being a renter for life.

Remember that some Americans qualify for specialized loans.

The Federal Housing Administration insures several kinds of loans. To see if you qualify, start by contacting several different lenders and asking them if they offer FHA-insured loans. Note that the FHA itself only INSURES the loan. The lender is still the one setting the rate and other terms. This is a neat arrangement because the FHA guarantee makes it easier for both the lender and the borrower.

VA loans are designed to ensure that all veterans or spouses of veterans (unless they remarry) receive mortgage assistance.