Mortgage Refinancing - Reasons a Loan May Not Be Approved

If for some reason this lender does not approve you, don’t give up. Each lender and each loan program has different guidelines. Just because you may not meet this lender’s required minimum guidelines does not mean that you wouldn’t fit quite nicely into a different lender’s guidelines.

There are several common reasons why lenders deny a loan application:

Poor credit report. A negative credit report generally indicates that you have not established a good credit history. Your first step should be to verify that the credit information issued to the lender is accurate. Ask to see a copy of your credit report that the lender received, or obtain a copy of your credit report yourself. In addition, consult with a local HUD Housing counseling agency to determine what steps you can take to restore your credit to an acceptable level. Depending on your situation, rebuilding your credit may only delay your mortgage refinancing for a short time.

Not enough income. Your ability to pay off a loan is reflected in your current earning and your future income potential. Lenders may decline a loan if the homebuyer does not meet the income requirements or cannot show proof of stable income. It is to your advantage to establish a consistent and stable income.

Too much debt. If your existing debts (credit cards, car loans, student loans) exceed the debt-to-income ratio for the loan, determine if you can pay off some of your debts before you apply to refinance your mortgage.