5 Actions You Can Take If a Lender Denies You a Loan

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When house-hunting, it is highly recommended that you seek pre-approval for the loan. The process of getting a mortgage pre-approval a thorough check and verification by a lender to assess your credit standing and evaluate that you can pay off the amount you’re seeking to buy the home. Lenders, however, have recently become stricter with lending requirements due to the uncertainty and volatility that the pandemic has brought to the market and economy.

During these challenging times, it is possible that your loan application could be denied. But there is hope!

According to the Federal Trade Commission, you have the right to the following:       

  1. Receive written confirmation – After submitting your complete application, the lender must inform you within 30 days if your application has been approved or denied in writing.    
  2. Ask for written explanation why you’re denied– You can ask for an explanation of why your application was rejected, and the lender must explain to you within 60 days the specific reason(s) why your application was turned down. For example, lenders may deny you a mortgage if your income is too low or if you have a very short and inconsistent employment history.   
  3. Review lender’s property appraisal – A lender could deny your application if the appraisal comes back low, which means the property does not have enough value to secure the loan you’re applying for. In cases such as this, you have the right to check the accuracy of the information in the appraisal.
  4. File a complaint if you suspect discrimination – The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act are the two federal laws that protect consumers from any type of discrimination. Consider filing a complaint with the Consumer Financial Protection Bureau (CFPB) if you think a lender was unfair in treating your application. If you suspect that you’re being discriminated against, you may consult your state’s Attorney General’s Office to find out if a lender violated your right as a consumer.

What can you do to increase your chances of getting approved for a mortgage?

Lenders typically evaluate your application based on your income, expenses, debts, employment, and credit reports. For a start, investigate your credit reports and dispute any errors you find to help improve your score. Gather all of your documents including pay stubs, bank statements, proof of employment, and other documents needed for an application. If a lender asks you for additional documents, make sure that you provide them in a timely manner or write a letter to explain your situation. Lenders must have all of these documents in order to process your application.

Consult with an RPM Mortgage Loan Advisor

Applying for a mortgage has the potential to be extremely difficult, especially when dealing with a national health crisis. However, if you’re buying a home or refinancing your mortgage, a professional RPM Mortgage loan advisor can help you. Get in touch with us today to learn more about your options.