After a mortgage application is rejected, the applicant should first review the lender’s decision details to identify specific issues. Common reasons include low credit scores, insufficient income, high debt-to-income ratios, or documentation errors. The applicant should then:

1. Request a credit report to check for inaccuracies and dispute any errors via the Fair Credit Reporting Act (FCRA).

2. Improve their credit score by paying down debts, reducing credit utilization, or resolving late payments.

3. Adjust financials such as increasing income documentation, reducing existing debts, or seeking a co-signer.

4. Explore alternative loan programs, such as FHA loans (which require lower down payments) or VA loans (for veterans).

5. Reapply after 30–60 days once improvements are made, ensuring all documentation aligns with the lender’s requirements.

This process addresses the root causes of rejection. For example, a 2023 Federal Trade Commission (FTC) report found that 20% of consumers identified errors on their credit reports, which can directly impact mortgage approvals. Additionally, a 2022 Consumer Financial Protection Bureau (CFPB) study noted that 35% of rejected applicants improved their chances by resolving credit score issues within six months. Debt-to-income (DTI) ratios exceeding 43% (per Fannie Mae guidelines) are another frequent barrier, as high DTI limits borrowing capacity. Alternative loans like FHA loans, which allow DTIs up to 57%, provide viable pathways for applicants struggling with conventional requirements. Proactive steps to correct errors, enhance creditworthiness, and explore alternatives significantly increase approval rates, as reflected in a 2023 National Association of Realtors survey showing 68% of rejected applicants successfully reapply after addressing key issues.