After a bank denies a loan following a down payment, borrowers should first request a detailed explanation of the denial reason. Common issues include insufficient down payment funds, poor credit scores, documentation gaps, or unstable income. Addressing these factors is critical. Next, borrowers should explore alternative lenders, such as credit unions, government-backed programs (e.g., FHA loans), or private mortgage insurance (PMI) to cover a smaller down payment. They should also review their financial health, save additional funds, or seek a co-signer to strengthen their application.

The denial process often stems from specific eligibility gaps. For instance, the Consumer Financial Protection Bureau (CFPB) reports that 60% of mortgage denials in 2022 were due to credit score issues or documentation errors. Government programs like FHA loans require just 3.5% down payment but demand rigorous documentation, making them viable alternatives for borrowers with minor financial hiccups. PMI, typically costing 0.5% of the loan amount annually, allows smaller down payments but increases long-term costs. Data from the National Association of Realtors (NAR) shows that 45% of denied applicants successfully reapply after correcting documentation or boosting credit scores within six months. Proactive steps, such as negotiating terms with the initial lender or leveraging community down payment assistance programs, further improve approval chances. Ultimately, understanding the denial rationale and systematically addressing weaknesses are key to overcoming mortgage rejections.