NEW YORK – Oct. 31, 2011 – With the tightening of credit standards, more homebuyers find themselves rejected when they 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.
However, buyers shouldn’t try again until they closely evaluate why the lender turned down the original mortgage application and find ways to address the issues in their second or third attempt, says Marisol Torruella, a loan originator with the New York Municipal Credit Union. Applicants can, by law, find out why they were rejected in a mortgage application. The Equal Credit Opportunities Act gives lenders 30 days to tell applicants, in writing, the specific reasons why they denied a loan.
Some rejected borrowers may need to save for a larger downpayment or take steps to improve their credit score.
Some applicants may find that shopping around for other lenders helps (particularly if the applicant has been a longtime member at a credit union) or discussing other alternatives with the original lender. Applicants could also consider different options, such as a loan from the Federal Housing Administration (FHA), which has less stringent requirements. Surveys suggest that most borrowers aren’t aware of FHA loans.
Torruella says one of the main reasons homebuyers get turned down for a loan is that they’re trying to purchase more home than they can really afford. These applicants may need to get more practical with their home purchase too.