Stay Calm and Take These Steps
if You've Received a Mortgage Denial
Emotions play a big part in the home buying and financing processes. In fact, an emotion (or two) may have provided most people the initial motivation to begin the process to buy in the first place ...
Emotions, such as curiosity, optimism, joy, excitement, pride, and even surprise drive people's desire to buy a home.
Add to those the emotions someone may feel during mortgage pre-approval and application ... such as nervousness, fear, stress, and anticipation ... and it's easy to see why the processes of home buying and financing are likened to an emotional rollercoaster.
Most of my posts focus on those actions borrowers can take to avoid or slow that emotional rollercoaster down. My aim is always to guide them through those steps that will proactively position them and then assist them through their home's financing to a successful mortgage closing.
But what happens in those instances when we hit a roadblock? When a denial for a mortgage is received?
First, it's important to know that, although dramatic and making for a compelling story, that outcome can typically be avoided through careful preparation, with time, and via the guidance of an experienced and knowledgeable mortgage originator.
But in those instances where an actual mortgage application has been made and then denied ... what then?
Stay calm. Don't panic ...
I've found that a denial returned at this point is typically not much of a surprise for those of my borrowers receiving it. They know the details of those issues that might prove detrimental to receiving approval.
I've held preparatory conversations outlining the strengths and weaknesses ... the pros and cons ... of their mortgage application with them. They've been made fully aware of their odds for mortgage approval.
So typically at this point, it's a matter of our "re-grouping", so to speak. And then finding another way of addressing those issues raised during their Underwriting Review.
What are those issues that result in mortgage denial most often? Those contributing issues are:
- The Appraisal: Value Concerns and Property Condition issues are the most commonly raised flags
- Something new (and adverse) has appeared since the Credit Report taken prior to Mortgage Closing. (Example: A new credit application, such as those for a furniture or vehicle purchase or the appearance of a missed payment) *Be Aware: Lenders are required to reverify Credit and Employment within 10 (ten) days of Mortgage Closing.
- Employment changes (See above re-verification info)
- Income changes (Loss of income, reduction in hours, reduced overtime)
- Debt to Income Ratios (A result of "new/additional debt" or reduced income)
- Money in bank accounts have been moved or unaccounted cash deposits were made
It's important to know: Receiving a mortgage denial in and of itself does NOT damage your credit score. So do not fear that moving forward.
But ... what comes next?
Continue to talk with your Mortgage Originator. They will provide the details as to the findings of the Underwriter and your denial.
Listen carefully and follow their instructions to address the issues raised. Keep an open mind and consider/discuss all options available to you.
Many times issues and problems can be resolved easily and quickly and not derail your home buying transaction. For those issues that demand more time and attention, it's vitally important to follow the advice of your mortgage originator.
Focus razorlike on those issues contributing to the denial. Roll up your sleeves and get back to work. If credit damage was the culprit ... repair it. Rebuild financial accounts, pay down debt, or rectify employment concerns.
If an appraisal contributed to the denial received, consider all options available to you prior to moving forward. Sometimes, appraisal concerns and issues can be negotiated items between Seller and Buyer, and thus resolved. Remain in close communication with your agent and lender for advice resulting in the quickest and best results.
As I said above, experiencing emotions throughout your home buying and financing process is only natural and to be expected. The buying and financing of a home is a big step in someone's life.
Just don't let the emotions run away with you, blind you, slow you, or keep you from taking actions on your own behalf. That advice is especially key when a denial for mortgage is received.
Stay calm. Let the emotion of determination drive you forward.
Confer with your mortgage originator. Gather the facts that contributed to the denial, then take those actions that will reap you more positive results.
And remember: Should reach a point where your present mortgage originator is unable or unwilling to work with you towards the securing of a more positive result, you always have the option to search for a new lender. Different, more favorable mortgage programs and varying options for financing and financing service may exist elsewhere.
Don't give up!
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