If a mortgage application is denied, the applicant should first review the lender’s explanation to identify specific issues. Common reasons include credit score deficiencies, insufficient income, poor credit history, or insufficient down payment. The applicant should then:

1. Request a detailed denial reason from the lender, as required by the Equal Credit Opportunity Act.

2. Review and correct errors on their credit report via .

3. Improve creditworthiness by paying down debts, reducing credit utilization, or disputing inaccuracies.

4. Strengthen financial documentation, such as providing additional income statements, asset proofs, or resolving tax liens.

5. Shop for alternative lenders, as criteria vary by institution. For example, credit unions or government-backed programs (e.g., FHA loans) may offer more flexibility.

Data from the Consumer Financial Protection Bureau (CFPB) shows that 50% of mortgage denials in 2022 were due to credit report issues, while 30% stemmed from income or employment concerns. A FICO score below 580 significantly increases denial likelihood, with scores above 740 typically qualifying for the best rates. The Federal Reserve notes that applicants with scores between 620–679 face higher rejection rates compared to those above 680. Correcting credit errors and boosting scores by 20–30 points can improve approval chances by 40–60%, according to LendingTree’s 2023 data. For income-related denials, lenders often require a debt-to-income (DTI) ratio below 43%, so reducing monthly obligations or increasing income documentation (e.g., bonuses, freelance income) may help. Government programs like FHA loans allow DTIs up to 57%, making them accessible to applicants with moderate incomes. Refinancing through these programs can lower rates by 0.5–1.5% for eligible borrowers, per the U.S. Department of Housing and Urban Development (HUD). Proactive steps to address denial factors, combined with strategic lender selection, significantly enhance approval odds and financial outcomes.