If a mortgage application is denied, the applicant should first review the lender’s decision to identify specific issues such as credit score gaps, insufficient income, or property valuation concerns. Addressing these factors is critical. For credit score issues, improving creditworthiness through paying bills on time, reducing debt, or disputing inaccuracies can help. Increasing savings for a larger down payment or shorter loan term may also strengthen the application. If the property lacks necessary repairs, working with a real estate agent to find a suitable alternative is advisable. Additionally, exploring alternative loan programs, such as Federal Housing Administration (FHA) or Veterans Affairs (VA) loans, which have less stringent requirements, can be effective.

The effectiveness of these steps stems from data showing that 20% of mortgage rejections in 2022 were due to credit score deficiencies, according to the Consumer Financial Protection Bureau (CFPB). Lenders typically require a minimum credit score of 620 for conventional loans, while FHA loans accept scores as low as 580 with mortgage insurance. Reapplying after addressing these issues increases approval chances by 35%, as noted in a 2023 National Association of Realtors report. For instance, FHA loans accounted for 12% of all mortgages in 2023, often assisting applicants with scores below 620. Similarly, VA loans, which require no down payment, helped 6% of homebuyers in 2023, per data from the U.S. Department of Veterans Affairs. Proactive adjustments to financial profiles and leveraging government-backed programs significantly improve outcomes after a rejection.