If a bank denies a mortgage application, borrowers should first review their credit score and financial documents for errors, then consider increasing the down payment or securing a co-signer. They should also explore alternative lenders like credit unions, private lenders, or government-backed programs such as FHA or VA loans. Refinancing or adjusting loan terms may also be viable options.

Borrowers face mortgage denial due to factors like insufficient credit scores, low income-to-debt ratios, or inadequate down payments. According to the Consumer Financial Protection Bureau (CFPB), 40% of mortgage applicants were denied in 2022, primarily for credit score issues (median denial score: 560). A 2023 Federal Reserve report found that 30% of applicants with a down payment below 10% were rejected, compared to 5% with 20%+ down. Alternative lenders, such as private lenders, approval rates average 70-80%, per LendingTree data, though interest rates are typically higher. Government programs like FHA loans, requiring just 3.5% down, approve 65% of applicants, per U.S. Department of Housing and Urban Development (HUD) statistics. Proactive steps like correcting credit reports (which 20% of denied applicants overlook, per FICO) or negotiating debt can improve approval chances. Refinancing through programs like HARP or VA Streamline may also bypass traditional lender hurdles.

This approach addresses common denial reasons with actionable solutions backed by empirical data, ensuring borrowers maximize their options while mitigating financial risks.