Mortgage Application Denied And Choosing Another Lender

This ARTICLE On Mortgage Application Denied And Choosing Another Lender Was PUBLISHED On August 4th, 2020

Options for borrowers when mortgage application denied by a lender:

  • The home buying process can be a roller coaster of emotions
  • Excitement, nervousness, and anticipation
  • All of those emotions are standard
  • However, when your mortgage loan gets denied, a new breed of emotions take over
  • You’re probably feeling panic, disappointment, and betrayal
  • Well, I am a firm believer that no mortgage team denies an application on purpose, there are times when an inexperienced loan officer will put you in a tough situation
  • In this blog, we will detail what steps to take if your mortgage loan is denied. It is important to stay positive during this time

In this article, we will cover and discuss Mortgage Application Denied And Choosing Another Lender.

What To Do When Getting News Of Mortgage Application Denied

Mortgage Application Denied
Gustan Cho Associates

The first step you should take if your mortgage loan is denied is to gather all the proper information necessary.

  • You will need to hound your loan officer for the exact reason for the denial
  • We received numerous phone calls from clients who have been denied by their current lender who cannot give us a straight answer as to why
  • While we understand you are not a mortgage guideline expert, you have put your faith and trust in your current mortgage company
  • The least they can provide you is a clear-cut answer for your denial. It is best to get something in writing if possible
  • You may not contact the underwriter directly, but your loan officer should have the respect to provide you with a clear and detailed answer
  • The reason this is so important is you may be running into LENDER OVERLAYS
  • If your reason for the denial is an overlay, we can take your file over and still close the mortgage
  • Once you have the exact reason for your denial, please call Mike Gracz on 630-659-7644
  • After a brief conversation, we will be able to tell if you are running into a lender overlay or if your file really needs to be denied
  • At this point, we will either start a new loan file at Gustan Cho Associates or we let you know why we cannot help you at this time

Even if you do not qualify today, we will create a customized financial plan to qualify as soon as possible.

Mortgage Application Denied And Getting Earnest Money Back

If we cannot help you, follow this step if your mortgage has been denied.

  • Do everything you can to get your earnest money back
  • Depending on how far along you are in the process, this can be possible
  • If you are passed your inspection waiting period, it may be harder to get your earnest money back
  • Important to know any money you have paid for inspections and appraisal will usually not be refunded
  • If the appraiser has not physically gone to the property to complete the inspection, you can get your money back
  • It is important to request this in writing from your lender
  • If you were working with a real estate attorney, please put them to work in the situation
  • This is the reason you were paying them, to fight on your behalf

You will want to get back every penny possible to put into your next property.

Stress During The Mortgage Process

What is stress during the mortgage process

There is nothing worse than getting a denial during the mortgage process.

  • We do understand how stressful this can be
  • While we will do everything in our power to help you obtain a mortgage, there are times you simply do not qualify. It is important to select a lender who you have constant communication with
  • You should be well informed on mortgage applications during the whole process
  • The Team at Gustan Cho Associates are highly skilled when it comes to difficult mortgage situations
  • We even have a TBD UNDERWRITING PROCESS to avoid mortgage denials later in the process

If your situation is a one-off scenario, we recommend utilizing this process. It can save you thousands of dollars in the long run.

Common Reasons For Mortgage Denial

Common reasons for mortgage denial

  • The most common reason borrowers are denied a mortgage is a lack of transparency during the mortgage process
  • Honesty is key
  • It is very important that you are honest with your loan officer and your loan processor
  • Clients who may have had a derogatory item in the past and choose not to bring this to their loan officers’ attention are only doing themselves a disservice
  • Tax liens and judgments no longer report to the credit bureaus, so your mortgage team will not know about these for a few weeks
  • Once you start the mortgage process, a third-party verification that scrubs public records will be ordered
  • During this third-party search, this information will show up
  • It is important not to hide anything from your mortgage team
  • Underwriting guidelines are so strict, and derogatory information will be found during the process

You and your lender are on the same team, you have the same common goal.

Short Of Funds For Cash To Close

Another common reason for mortgage denial would be a lack of funds for the down payment, closing costs, and reserves.

  • In the mortgage industry, documentation for assets is important
  • All funds for the down payment, closing costs, and reserves must be verified and from an acceptable source
  • Clients who deal with cash are in being a tough situation
  • All of your funds must be documented, cash is very difficult to document
  • If you plan on using cash as part of your down payment or closing costs, you must be very upfront with your loan officer
  • Typically, you will need documentation showing where you received this cash

We do understand that life happens during the mortgage process, if you need to make a large purchase, please contact your loan officer before doing so. Not having enough funds to close will result in a denial.

Taking Out New Debt During The Mortgage Process

Which means incurring new debt during the mortgage process

Taking out new debt. Acquiring new debt during the mortgage process can be a deal killer.

  • Any and all debts are taken out will be counted against your debt-to-income ratio
  • Even if they are obtained after your initial credit report is pulled, the mortgage lender will complete a credit refresh and count any additional payments
  • It is very important that you do not have your credit checked at all during the mortgage process, and if you need to, please let your mortgage team know
  • You want to make sure you can afford the additional payment and not lose your home

If you’ve had a chance to read our other blogs, you will understand we have seen many unique situations over the years. Many of our clients have been turned down by their current lender and we are still able to get them closed. Please check out some of our reviews. Our loan officers are highly skilled when it comes to guidelines. Please check out our YouTube CHANNEL to stay up-to-date with the changing mortgage guidelines.

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