If a mortgage application is denied, the applicant should first review the denial reason provided by the lender. Common causes include low credit scores, insufficient income, high debt-to-income ratios, or property issues. The applicant must correct errors in their financial documentation, dispute inaccuracies on credit reports, and improve their financial standing before reapplying. They should also consider alternative loan options, such as government-backed mortgages (e.g., FHA or VA loans), which may offer more lenient requirements. Consulting a housing counselor or financial advisor can provide personalized guidance. Reapplying after 3–6 months of addressing the issues is advisable, as lenders often update their evaluations.

Denial rates for mortgage applications in the U.S. reached 20.3% in 2022, according to the Mortgage Bankers Association (MBA). Approximately 45% of denials stem from credit score issues, while 30% relate to debt-to-income ratio problems. The Consumer Financial Protection Bureau (CFPB) notes that applicants with scores below 580 are denied 85% of the time, compared to 15% for scores above 740. Correcting credit report errors can increase approval chances by up to 40%, as 25% of consumers have inaccuracies on their reports, per the Federal Trade Commission (FTC). Reapplying after 3–6 months with improved credit scores (e.g., raising a score from 650 to 700) can reduce denial rates by 50%, based on myFICO data. Government-backed loans, such as FHA mortgages, require lower credit thresholds (580+) and smaller down payments (3.5%), making them accessible to applicants excluded by conventional lenders. However, these loans often carry higher interest rates and mortgage insurance costs. Proactive steps, like negotiating debt or increasing savings, can strengthen an applicant’s profile. For example, reducing credit utilization by 20% can boost a credit score by 50–100 points within six months, according to FICO. Ultimately, persistence and strategic financial adjustments are critical to overcoming mortgage denial.