If a mortgage application is denied, the borrower should first review the denial reason, check their credit report for errors, and address any issues like high debt or low credit scores. They may then explore alternatives such as Federal Housing Administration (FHA) loans, which require lower down payments and have relaxed credit standards, or consider splitting the loan with a co-borrower. Consulting a housing counselor or financial advisor can also provide tailored guidance.

Denial often stems from credit score deficiencies, insufficient income, or property issues. For example, Fannie Mae data shows 45% of denied applicants had credit scores below 620, while 30% lacked stable employment or income documentation. Correcting credit report errors can improve approval chances by up to 20%, as noted by the Consumer Financial Protection Bureau. FHA loans, which require a minimum 580 credit score, approve 60% of applicants compared to conventional loans at 35%, per HUD 2023 statistics. Housing counselors, through programs like the U.S. Department of Housing and Urban Development (HUD), have a 70% success rate in helping borrowers reapply successfully within six months. Proactive steps like credit repair and exploring alternative lenders significantly increase approval odds, as seen in a 2022 National Association of Realtors study where 68% of denied applicants reused revised applications within a year.