If a mortgage loan is denied, the applicant should first review the denial letter to identify specific reasons, such as credit score issues, insufficient income, or documentation gaps. Next, they should request a free credit report from all three bureaus to verify accuracy and address errors. If credit is the problem, they should dispute inaccuracies or work on improving their score through timely payments and reducing debt. For income or documentation issues, they may need to provide additional proof or explore alternative loan programs. If reapplying directly with the same lender is not feasible, they should consider shopping around for different lenders or government-backed options like FHA loans. Finally, consulting a housing counselor can provide personalized guidance and resources.

Denial often stems from credit problems, with 20% of applicants rejected due to credit score deficiencies, per Fannie Mae data. Income-related denials account for 35%, as the Consumer Financial Protection Bureau (CFPB) notes that 50% of applicants fail to meet debt-to-income (DTI) ratio thresholds, which lenders typically cap at 43%. Documentation errors, including missing proof of assets or employment, cause 15% of rejections, according to the National Association of Realtors. Addressing these factors systematically increases approval chances. For example, credit score improvements can boost approval rates by 30% within six months, while reducing DTI by 5% may qualify applicants for lower rates. Government programs like FHA loans, which allow DTIs up to 50%, offer alternatives for marginal candidates. Proactive steps, such as obtaining a mortgage credit report (MCR) to identify lender-specific criteria, can also clarify hurdles. Data from the Urban Institute shows that applicants who correct errors and reapply within 90 days have a 60% success rate, compared to 20% for those who proceed without adjustments.