Three Ways to Turn Your Mortgage Application Rejection Into an Approval

Ginger Dean

September 30, 2013

By: Ginger Dean, Home Finance Specialist

In: Finance and Legal

One of the hardest things to hear is that your mortgage application was rejected. It's unfortunate, but the truth is that many people don't know what they are getting in to when they apply for a mortgage and may not really know what information is used on their application.

The key to getting your mortgage application approved is to know what qualities banks are looking for in applicants.

A little banking secret about mortgage applications

When a mortgage application is rejected for the first time, it doesn't mean that clients will never be approved for a mortgage. There is still some hope and there is always a solution.

Some banks are able to send the same mortgage application twice for each client with the same property. What does that mean? It means that if a mortgage application is rejected, clients have to be very careful before they apply again.

While you may be working with a bank representative on your mortgage application, keep in mind that they do not have the authority to approve (or reject) mortgage applications. This decision is made by an underwriter. So if you receive bad news, please don't take it out on the messenger.

Know why banks will approve a mortgage application

Banks look at a variety of factors when deciding to approve or reject a mortgage application. A person's credit history, the amount of time he or she has been with their current employer, the total amount of savings, the total amount of other debts, current monthly payment obligations, and the after-tax current income are all taken into consideration when approving a mortgage application.

Before you make an appointment with your bank to start a mortgage application, it's a good idea to order a copy of your credit bureau reports - all three. This will give you a snapshot of your personal financial situation. If any personal or financial information is showing incorrectly on your credit bureau report, have it corrected before you visit your bank.

Get your mortgage application approved:

Get a pre-approval. Before you start shopping for your dream home, work with your mortgage banker to get a pre-approval. It only takes a few minutes and it's free of charge. This will give you an idea of how much the bank is willing to approve for your mortgage loan and you can start shopping for a home within your price range.

Know your limits. There are applicants who want to pay more for their home than they can afford because they really love the house. This can be a huge financial mistake. You don't want to have to sell the home in less than a year because you can't afford the payments. Stick to your pre-approval amount and get your mortgage approved. Your total monthly payments should not be more than 40% of your after-tax income. In fact, just because the bank approves you for $400,000 doesn't mean that you should spend that amount on a home. Try to stay below the approved amount when possible.

Talk to your financial planner. If your pre-approval is not approved then your mortgage banker will give you suggestions on how to get your mortgage application approved. One of the main reasons why people are rejected for a mortgage is because they can't afford it; this means that their current monthly income is not enough to support the monthly mortgage payments. This can be fixed by lowering your expectations and going with a cheaper home or spending more time saving up so you have a larger down payment.

Make sure that you enter the mortgage application process with realistic expectations and not visions of a mansion you can't afford. This way you ensure no surprises or let downs along the way. Finally, your credit report is your friend. Check it for errors and any potentially negative factors that can decrease your chances of an approval.

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