In this blog, we will cover and discuss your mortgage options on getting a mortgage after being denied and pre-approved by a lender. Gustan Cho Associates are mortgage brokers licensed in 48 states with over 170 wholesale mortgage lenders. Included in our partnership are wholesale lenders with no lender overlays on government and conforming loans, non-QM loans, alternative financing loan programs, no-doc home loans, DSCR mortgages, bank statement mortgages, asset depletion loans, non-QM loans one day out of foreclosure and bankruptcy, and hundreds of other mortgage programs. The team at Gustan Cho Associates are experts in helping home buyers getting a mortgage after being denied and pre-approved by a different lender.
Can You Reapply With a New Lender If Mortgage Is Denied?
Over 75% of our clients are borrowers who were denied at other mortgage companies and one of the most frequently asked questions is can you reapply if your mortgage is denied? The simple fact and answer are YES. There is no waiting period after being denied a mortgage by a lender to reapply with a new lender. The first step in going with a new lender is to do a self-analysis. Why did you get denied a mortgage? Was it because of not meeting the agency mortgage guidelines, or was it because of the mortgage company’s internal lender overlays?
Why Did You Get Denied For A Mortgage After Being Pre-Approved?
If you meet all the agency guidelines on government and/or conforming loans, you will definitely have no problem in getting a mortgage after being denied with a lender with no overlays. If you did not meet the agency mortgage guidelines, what section of the guidelines do not meet? Everything is correctable. It is not if you are getting a mortgage after being denied but rather WHEN are you getting a mortgage after being denied. The first and most important task is to go with a mortgage broker who are experts in your type of loan program with a network of wholesale mortgage lenders. Gustan Cho Associates are experts in helping borrowers getting a mortgage after being denied.
What Should You Do If Your Lender Denies Your Mortgage Loan Application?
Another common frequently asked question by borrowers after getting denied is what things should you do if your lender rejects your loan application? The first and foremost thing is to find out the reason you got denied? Was it because you did not meet the agency guidelines or because of the lender overlays? Ask the loan officer why they pre-approved you in the first place and why are they denying you? Were you denied because of the mortgage lender’s overlays?
What Are Overlays By Mortgage Companies?
Lender overlays are higher lending requirements by the individual lender above the FHA, VA, USDA, Fannie Mae, and Freddie Mac agency guidelines. Try to understand the basic agency guidelines. Everything you need to know, we have the content on our website at www.gustancho.com. Since we have thousands of pages, go to the home page and go over the mortgage programs and boxes of FAQs mortgage programs and guidelines. If you need further information, the guide should have links to more information on the same topic.
What Are The Steps For Getting a Mortgage After Being Denied?
If you meet the agency guidelines but got denied a mortgage after being pre-approved, you are in great shape. There are lenders like us at Gustan Cho Associates with no overlays on government and conventional loans with hundreds of alternative mortgage loan programs. If you do not qualify because you do not meet the agency mortgage guidelines, there are other mortgage options for you such as non-QM and non-prime mortgages. Once you have evaluated your scenario, start interviewing new lenders and thoroughly check them out. Look them up on NMLS Consumer Access, check their online reputation, read their testimonials and reviews, and see if you can get personal referrals on past clients of theirs. Once you have decided on a loan officer and lender you want to work with, pre-qualify with them. You may want to lower the loan amount or increase the down payment as an option and solution for getting a mortgage after being denied.
The Main Reason For Mortgage Loan Denial After Being Pre-Approved
There is absolutely no reason why a mortgage should ever be denied after being pre-approved. We will cover some of the common reasons why mortgage companies deny loans after issuing pre-approvals. The bottom line for getting a mortgage after being denied after being pre-approved is two-fold. The majority of the time why mortgage loans are denied after being pre-approved is because of the incompetence of the loan officer and overlays by the lender. Getting a mortgage after being denied is by going with the best lenders for getting a mortgage after being denied. who are experienced and know tough mortgage files?
Best Lenders For Getting a Mortgage After Being Denied
So who are the best lenders getting a mortgage after being denied? They are mortgage brokers with a wide network of wholesale mortgage lenders. The network of wholesale lenders should be lenders with no overlays on government and conventional loans, and a wide selection of non-QM wholesale lender partners consisting of government, conventional, non-QM, non-priime, no-doc loans, asset-depletion, and dozens of other mortgages for bad credit. Captive mortgage bankers should be out of the picture. Getting a mortgage after being denied is definitely not going with captive mortgage bankers. Captive mortgage bankers only deal with their in-house mortgage programs and most have lender overlays on FHA, VA, USDA, and conventional loans.
What Happens If You Can’t Get Approved For a Mortgage?
Many borrowers think it is the end of the world after getting denied a mortgage by a lender. A frequently asked question by borrowers after they get the news their mortgage just got denied, is what happens if you can’t get approved for a mortgage? Again, over 75% of our borrowers are folks who could not qualify at other lenders due to a last-minute mortgage loan denial, stress during the mortgage process or the lender did not have the specific mortgage program they were looking for. With us, the word would never get approved for a mortgage is not in our vocabulary. It is not IF you will be getting a mortgage after being denied, it is WHEN will I be getting a mortgage after being denied. One of the very simple solutions in getting a mortgage after getting denied is putting a larger down payment or going with a non-QM loan program. We have many choices of getting a mortgage after getting denied at Gustan Cho Associates.
Why Do I Keep Getting Denied For a Mortgage Loan?
Over 75% of our clients at Gustan Cho Associates are folks who got denied by other lenders or could not qualify at other mortgage companies. A large percentage of our borrowers who got denied at other lenders are borrowers who not just got denied by one lender but by multiple mortgage companies. We get this FAQ of why I keep getting denied for a mortgage loan, and the simple answer is you have not gotten the right lender. Again there is absolutely no reason why anyone should be denied a loan after being pre-approved.
What Are The Common Reasons For Mortgage Loan Denial After Being Pre-Approved?
Some of the common reasons for mortgage loan denial is bad credit, collections, charged-off accounts, high debt to income ratio, irregular and inconsistent income, not being able to document verified funds, overdrafts in checking account, credit disputes on non-medical credit tradelines, judgments and/or tax liens showing up during the mortgage underwriter’s third-party public records search, and many other reasons. Other reasons for a mortgage loan denial after being pre-approved is late payments in the past 12 months, low credit scores, or the lender who will not due to manual underwriting due to their lender overlays.
Why You Can Be Denied a Mortgage and What To Do If It Happens
Another typical frequently asked question at Gustan Cho Associates is why you can be denied a mortgage, and what to do if it happens. The answer to this question is going with the best mortgage broker with many loan options through a network of many wholesale and specialty mortgage lenders is key. This is where it starts. Gustan Cho Associates has a national reputation for being able to do loans other lenders can’t do. Over 75% of our clients are borrowers who could not qualify at other mortgage companies. Not only do we get home loans qualified, approved, and closed but we strive to close every single loan on time. This is why the team at Gustan Cho Associates is your best source on how to get a mortgage approved after being denied by a different mortgage company.
What Mortgage Is Best For Poor Credit and Low Down Payment Requirements?
FHA loans are hands down the most popular mortgage loan program in the United States. FHA loans are not just for home buyers with bad credit. Homebuyers with great credit, first-time homebuyers, and homebuyers with no credit can benefit from FHA loans. FHA Mortgages are also beneficial for borrowers with stellar credit. Some borrowers may not qualify for conventional loans due to the following:
- not meeting mandatory waiting period requirements after bankruptcy and/or housing event
- having a higher debt-to-income ratio
- having large outstanding collections and charged-off accounts
In the following paragraphs, we will be covering and discussing ways getting a mortgage after being denied by a lender.
Getting Denied For a Mortgage For Recent Late Payments
Just because borrowers have excellent credit scores and high income does not mean they can qualify for an FHA loan. Someone one year out of bankruptcy and/or foreclosure can have credit scores over 700. I get many calls and inquiries every day from borrowers who were told different things by lenders they applied to. I specialize in FHA loans with credit issues. Many of our viewers at Gustan Cho Associates call or inquire every day about case scenarios. The following reasons are other reasons why home buyers get denied by other lenders.
- credit disputes
- qualifying for a mortgage after a loan modification
- qualifying for FHA loans with charge-offs and unpaid collections
- high student loans
- recent late payments
- the other lender may not do manual underwriting on FHA and VA loans
Frequently Asked Questions on Getting a Mortgage After Being Denied?
Is it okay to have credit disputes under $1,000 for conventional loans?
Conventional loans –
- if the disputed message appears on AUS, regardless of the amount, the dispute message must be removed
- A new credit report obtained and/or the disputed account must be paid/closed
- Disputed accounts up to $1,000 are exempt from retracting credit disputes on FHA loans
Do lenders have any overlays for qualifying for a mortgage after a loan modification.
- Mortgage lending guidelines require timely payment after a mortgage loan modification of at least 12 months
- Borrowers can qualify for a mortgage one year after a mortgage loan modification
- Borrowers with a prior mortgage loan modification on their primary residence and who want to purchase a second home need to meet conventional lending guidelines
- This is because buyers cannot purchase a second home with an FHA Loan
- FHA Loans is for owner-occupant primary residences only
- Not second home financing nor investment home financing
- We do not have overlays
- Must follow Investor guidelines, i.e. satisfactory payment history for the past 12 months
- 12 month’s payment history needs to be verified with 12 months of canceled checks, or 12 months of bank statements, and verification of mortgage
Charge off posted on the credit report in the past 12 months. Is it okay to assume that this is okay for mortgage lenders with no mortgage lender overlays?
- Past-Due, Collection, and Charge-Off of Non-Mortgage Accounts Accounts that are reported as past due (not reported as collection accounts) must be brought current
- For example, borrowers with three months late on their automobile payment and are not current, need to have that auto payment current in order for you to qualify for an FHA Loan
- Any other credit accounts that have been delinquent need to be current
- Borrowers who are applying for one-unit, principal residence properties are not required to pay off outstanding collections or non-mortgage charge-offs—regardless of the amount.
Outstanding Collections To Qualify For Mortgage
Note: If the lender marks the collection account Paid By Close in the online loan application, DU will issue a message in the DU Underwriting Findings report stating that the collection must be paid. For borrowers applying for two- to four-unit owner-occupied and second home properties, collections and non-mortgage charge-offs totaling more than $5,000 must be paid in full prior to or at closing. Borrowers who are applying for investment properties, individual collection, and non-mortgage charge-off accounts equal to or greater than $250 and accounts that total more than $1,000 must be paid in full prior to or at closing.
June 24, 2022 - 8 min read