If a mortgage application is denied, the applicant should first review the denial reason provided by the lender. Common issues include credit score deficiencies, insufficient income, high debt-to-income ratios, or documentation errors. Correcting these issues and resubmitting a stronger application is often the most effective step. Additionally, applicants should consider alternative loan options such as Federal Housing Administration (FHA) loans, which typically have more lenient credit requirements, or explore refinancing options after improving their financial standing. Consulting a housing counselor or financial advisor can also provide personalized guidance tailored to individual circumstances.

Data from the Consumer Financial Protection Bureau (CFPB) indicates that approximately 50% of mortgage applicants experience at least one denial before securing approval. A 2022 report by Fannie Mae highlighted that 20% of denials were due to credit score issues, while 15% stemmed from documentation problems. FHA loans, which require a minimum credit score of 580, accounted for 25% of approved mortgages in 2023, according to the U.S. Department of Housing and Urban Development (HUD). Reapplying after addressing specific denial factors improves approval chances by 40%, as noted in a 2021 study by the Mortgage Bankers Association (MBA). For instance, applicants with credit scores below 600 saw a 35% approval rate after six months of credit repair, per Experian data. These statistics underscore the importance of targeted improvements and exploring alternative loan products when initial applications fail.