What are next steps if one gets turned down for a loan?

Asked by Trulia Chicago, Chicago, IL Thu May 23, 2013

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Fri May 24, 2013
The mortgage lender should explain to you why your were turned down.

1. If it is a credit issue - get a copy of your credit report and work with a credible credit company to to bring your credit score up . Typically you will need a 640 to qualify

2. Loan to value (LTV) - if you don't have enough for a downpayment, lower your living expenses for the short term and save for the down payment. 20% downpayment will help you to get qualified if you are having issues

3. Debt to income - understand how your monthly bills vs your monthly income effects what you can qualify for and how to manage your bills now so you can qualify for a mortgage.

You may qualify for a less expensive property and your mortgage lender should let you know how much you can afford.

To find out more, go to my website at https://www.guaranteedrate.com/maryKayLaurent

And pull down the e-book "Demystifying the Mortgage Process" you'll learn:
1. How to shop for and get a low cost and low rate mortgage
2. What's important to lenders in order to qualify you for a mortgage
3. What credit scores are and why they're important in the mortgage process
4. The Dos and Don'ts before applying for a mortgage
5. What documents are involved in getting a mortgage
6. The steps and timeline for getting a mortgage and buying a home

Also on my website you can apply for a mortgage, get a pre-approval letter in 10 minutes and a free credit report.

Mary Kay Laurent
Associate Vice President of Mortgage Lending

o: 773.516.6859 / m: 312.403.4150 / f: 773.435.0681
3940 North Ravenswood , Chicago, IL 60613
NMLS ID: 870598
NMLS ID 2611 / NMLS Consumer Access / Licensing Information

State License Numbers: CA - CA-DOC870598 - 4130699, IL - 031.0032236 - MB.0005932, WA - MLO-870598 - CL-2611
1 vote
Manuel Brown, Agent, Chicago, IL
Thu May 23, 2013
Here are a few pointers…

1. Know the reasons for rejection. If you submitted a formal mortgage application, the law requires that the lender send you a formal "adverse action" notice. The reasons for rejection listed, for example, a low credit score, high debt load, house beyond your means, can act as your to-do list for what you need to fix going forward.

2. Seek a second opinion. Guidelines differ between lenders. So if you still think your qualifications are in the ballpark for buying a home, consider seeking out a different lender for a second opinion.

3. Adjust your offer. If a lender rejects you for the 2.75% 30-year fixed-rate mortgage you wanted, perhaps they will reconsider at 3.3%. But that higher interest rate will cost you more cash over the life of the loan, so crunch the numbers and answer honestly if it is worth it. If feasible and sensible, you also could offer to increase the down payment and lower your loan request. But it may make the most sense to pause, polish up your finances and apply again down the road.

4. Budget first, house second. Restart your house shopping process by taking steps to understand your finances. Step 1: Calculate your household budget, which is your income minus all debts and obligations. Step 2: Use that figure to see what monthly mortgage payments you can comfortably afford. As you house shop, remember to factor in property taxes, homeowners insurance, home repairs, new furniture and appliances, and other budget outlays connected to a new home.

5. The 20% solution. In the current economic climate, have 20% of the home's value available in cash. "Even if you need less than that for the down payment, having that 20% on hand stacks the deck in your favor..

6. Know yourself. At least six months before you apply for your loan, you should request your credit report from all three credit reporting agencies. This is your chance to spot mistakes and challenge them with documented proof. Keep in mind that corrections may take 60 to 90 days to show up on credit reports.

7. Reinvent your money habits. These three moves could improve your credit score in the future.

• Avoid late payments while getting current on delinquent accounts, neglected student loans and any debts that ended up with a collection agency.
• Reduce your credit card balances to below 30% of your credit line.
• Reduce your debt-to-income ratio to 36% or less.

8. Steady on the job front. As much as possible, maintain a steady income and steady job, especially while you are in house-buying mode.

9. Back to school. Consider attending a homebuyer class offered at many public libraries and community colleges across the country. The U.S. Department of Agriculture brings them to rural areas as part of its Rural and Community Development program. The instructors are likely to have current information on aid programs and market conditions, which can help your strategy for landing a home loan that fits your wants and needs.

10. Skip the shortcuts. Would you take out a mortgage from a carnival barker? Then do not reply to an e-mail or dial that 1-800 number that offers a home loan to people with bad credit. Scammers are trolling for disappointed wannabe homeowners and will likely leave you with budget-breaking interest payments, if they do not simply scamper off with some bogus upfront fee. If you have doubts about a lender, check with your state's bank commission to see if it's registered to make home loans in your state.
1 vote
Joanna Weiss, , Chicago, IL
Thu May 30, 2013
It will depend on what was the cause of the decline. Sometimes you will need to improve your credit, put down a higher down payment, or perhaps the condo builiding doesnt fit the lender. I would be happy to help. Joanna 773-327-3580
0 votes
Bill J Delig…, Agent, Naperville, IL
Wed May 29, 2013
Improve Credit - Increase Income - Decrease Debt - Save more money for down payment.
0 votes
Riccardo War…, Agent, Bolingbrook, IL
Fri May 24, 2013
That answer depends on why the individual was turned down. Just because 1 lender can't do it, doesn't mean someone else can't.

Sean Cochran
Quality Mortgage Lending
630-330-2229 cell
630-470-6830 office
*FHA down to 600 Fico Scores
*USDA no money down loans
*$100 Hud Purchase Program
*Pre Approval letters in 24 hours or less
*Unlimited LTV on Fannie Freddie Harp Loans
*203k Specialist
*Jumbo Loans to 90% LTV with no mortgage insurance
0 votes
Curly Sue, , Texas
Thu May 23, 2013
Repair credit. Get a job...or a better job.
0 votes
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