What to do if your loan is denied
Applying
for a mortgage loan can be one of the most stressful
times in anyone’s life. The process is very long
and can be extremely overwhelming.
The worst part of it all is that not everyone who applies
for a loan is approved. There are many reasons why a loan
application would not be approved, and it is a very hard
thing to deal with if it happens to you.
The article, “If your loan is denied,” featured
on mortgage-x.com, tells you what to do if this happens
to you.
“If your application is turned down, federal law
requires the
lender to tell you, in writing, the specific reasons
for the denial. If you fully understand why the loan was
denied, you may be able to find answers or alternatives
that will satisfy the lender. You may be denied credit
for various reasons, including not meeting the creditor's
minimum income requirement or not being at your address
or job for the required amount of time.”
Besides credit problems, one of the most common reasons
people are turned down for a loan is because of insufficient
down payment or insufficient income. But do not worry
too much yet, there are a few things you can do to help
your situation. First of all, there are a variety of programs
that help people with these same problems.
“If your loan
application was rejected because of your insufficient
income to afford the house you want or you have insufficient
funds for closing costs and a down payment, you could
consider loan programs for low- to moderate-income borrowers
with lower down payment requirements.”
“Federal Housing Authority plays a major role in
supporting homeownership by underwriting homeownership
for lower- and moderate-income families and first time
homebuyers through its mortgage
insurance programs. FHA loans have lower down payment
requirements and are easier to qualify than conventional
loans. Down payments can be as low as 3 percent, and closing
costs can be wrapped into the mortgage. U.S. Department
of Veterans Affairs and the Rural Housing Service offer
no down payment loans.”
All of these programs are a great option if you have recently
been denied from a loan because of an inadequate down
payment or income. There are also state sponsor programs
that can help too, and vary from state to state.
The appraisal value of your property can also affect whether
you are approved or not. If you requested a loan amount
which is larger than 95 percent of the appraised
value of the home, then you could be denied as well.
But there are a few things that can be done: “You
can try re-negotiate with the seller for the purchase
price to lower the loan amount; Make additional down payment
to cover the difference between appraised value and purchase
price; If you think the appraiser undervalued the property
suggest that the lender re-examine the appraisal.”
Now, one of the main reasons people get denied for a mortgage
is because of poor credit history.
“The Fair Credit Reporting Act requires a lender
that denies your loan application to tell you whether
it based its decision on information contained in your
credit report. If your loan is turned down because of
a poor credit report, you may request a free copy of the
report from the credit report company. You have the right
to dispute the accuracy or completeness of any information
in your credit report. The credit bureau must correct
the errors in the report. If there are unsettled disputes
over certain accounts, you can include your side of the
argument in the report. If there were special circumstances
(decease etc.) surrounding old credit problems, ask for
a chance to explain.”
“If the credit report is accurate and you have a
poor credit history, you need to start repaying outstanding
balances on time in order to re-establish an acceptable
record and then try to apply for a loan again.”
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