After a rejection

Some borrowers think that because their mortgage application is turned down the first time, they won’t ever be approved. In reality, some borrowers succeed on the second or third attempt, usually with a different mortgage professional, and often several months later, after they have saved more money for a larger down payment or improved their credit score.

Making sense of the story

• Before reapplying for a mortgage, borrowers are advised to look at the reasons they were initially rejected.
  
• The Equal Credit Opportunities Act requires lenders to give loan applicants specific reasons in writing within 30 days of their decision. If it’s based on a problem in the borrower’s credit report, the lender must tell the borrower the name and address of the credit agency that provided the information.
  
• Talking to the loan officer who denied the application to see how close the borrower was to being approved also can be helpful. Sometimes the gap is small and could be bridged with a larger down payment or another home appraisal, for example.
  
• It also may be worthwhile to shop around for other lenders. Borrowers can work with a mortgage broker or an online network like LendingTree or Zillow’s Mortgage Marketplace.
  
• A credit union also might be a better bet for some applicants. Credit union loan committees may permit better deals for longtime members; they might also modify loan terms for borrowers they already know.
  
• However, first-time buyers may need to scale back their aspirations. One reason people get turned down for a mortgage is because they try to buy more property than they can afford based on current incomes.
  
• Applicants also should look at ways to strengthen their financial picture. If a borrower’s credit is poor, paying down credit-card balances can help to increase a FICO score.