If a mortgage application is denied, the borrower should first review the denial letter to identify specific reasons, such as credit score issues, insufficient income, or property concerns. Correcting errors in documentation, improving creditworthiness through timely payments, or increasing savings for a larger down payment are common solutions. Borrowers may also reapply with a stronger financial profile or explore alternative loan programs like FHA or VA mortgages. Consulting a housing counselor or attorney can provide tailored guidance.

Mortgage denials often stem from credit score deficiencies or high debt-to-income ratios. According to the Consumer Financial Protection Bureau (CFPB), approximately 20% of mortgage denials in 2022 were due to credit score problems, with scores below 580 being particularly problematic. Fannie Mae’s guidelines require a minimum credit score of 620 for conforming loans, and 30% of applicants with scores between 580-619 are denied. Addressing these issues directly, such as paying down credit card balances to reduce utilization rates or disputing inaccuracies on credit reports, can significantly improve approval chances. Data from the National Association of Realtors (NAR) shows that borrowers who repair their credit scores by 50 points typically see a 40% increase in mortgage approval rates within six months. Additionally, improving debt-to-income ratios by reducing monthly debt payments below 43% of gross income aligns with federal qualified mortgage standards, which 65% of lenders adhere to. Proactive steps like these leverage established lending criteria to enhance approval probabilities.