With the tightening of credit standards, more home buyers are finding themselves rejected when they go to apply for a loan. But after just one rejection, lending experts say buyers shouldn’t give up — they may still be able to qualify for a mortgage if they keep trying.
But buyers shouldn’t give it another try until they take a close evaluation of why the original mortgage application was turned down in the first place, and find ways to address those issues in their second or even third attempt, Marisol Torruella, a loan originator with the New York Municipal Credit Union, told The New York Times. Applicants can, by law, find out why they were rejected in a mortgage application. The Equal Credit Opportunities Act requires lenders within 30 days to give applicants, in writing, the specific reasons why they weren’t given a loan.
For some rejected borrowers, they may need to save up for a larger down payment or take steps to improve their credit score.
Some applicants may find shopping around for other lenders can help (particularly if the applicant has been a longtime member at a credit union) or discussing more alternatives with a lender. Applicants might find a better option is a loan from the Federal Housing Administration, which have less stringent requirements, but some surveys show that most borrowers aren’t aware of FHA loans.
Torruella says one of the main reasons home buyers get turned down for a loan is that they are trying to purchase more home than they can really afford, based on their income. So applicants may need to get more practical with their home purchase too.
Source: “Mortgages: After a Rejection,” The New York Times (Oct. 13, 2011)