I applied for a mortgage loan and my lender denied my application. What can I do? | Consumer Financial Protection Bureau (2024)

FAQs

What should you do if your lender rejects your loan application? ›

You should request an explanation from your lender as to why your application was denied. The lender is required to provide you this explanation in writing if you request it, and must to give you copies of the credit score upon which the denial was based. Don't be discouraged. Another lender may approve you for a loan.

If you believe a lender has discriminated against you for any reason, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372). You'll need the dates, amounts, and other details about your complaint before submitting.

Though you can't usually speak directly to an underwriter, your loan officer should give you a clear reason for the denial. You'll have a short time to try to overturn the denial — it doesn't become official until the lender issues a denial letter. Gather all your paperwork.

Under the Equal Credit Opportunity Act, you have the right to ask your lender why it rejected your application, as long as you ask within 60 days. After you request an explanation, the lender must provide you with a specific reason for your denial. You can use the information it gives you to help fix any issues.

Applying for a loan will impact your credit rating. This is because the application involves a hard credit search. However, the search won't say if you were accepted or refused, so a loan rejection won't damage your credit score any more than an approval.

Answer: Ask your lender why and Shop for a different lender or type of mortgage. Explanation: You need to know why in order to address the problem and by shopping for a different lender, you may find another one willing to help. Filing a dispute will serve no purpose.

The federal fair lending laws—the Equal Credit Opportunity Act and the Fair Housing Act—prohibit discrimination in credit transactions, including transactions related to residential real estate.

Banks, mortgage companies, and other commercial lenders generally have a fiduciary duty to their borrowers. Borrowers may be able to take legal action if their lender was not acting in their best interest with regard to the loan—for example, by misleading them or failing to provide information about their loans.

Examples of Lending Discrimination

Providing a different customer service experience to mortgage applicants depending on their race, color, religion, sex (including gender identity and sexual orientation), familial status, national origin or disability.

Reasons your mortgage application may be denied include a dip in your credit score, increased debt, paperwork errors, a low home appraisal and unverified cash deposits.

How to get a loan when everyone denies you? ›

Paying down debts, increasing your income, applying with a co-signer or co-borrower and looking for lenders that specialize in loans within your credit band could increase your approval odds.

Under the Red Flags Rules, financial institutions and creditors must develop a written program that identifies and detects the relevant warning signs – or “red flags” – of identity theft.

Insufficient Credit

If you lack significant credit history, you will likely be denied a loan. Therefore, the first step in addressing this problem is to start building your credit history so that your lender can evaluate how you manage your credit and debt.

There are many reasons why an underwriter may deny your mortgage loan, such as a low income, an unsatisfactory credit history or a recent change in employment. If an underwriter denies your mortgage loan, try going to a smaller lender or addressing the issues that caused the denial in the first place.

The Bottom Line

Although there are various reasons for getting denied when applying for a personal loan, five of those reasons include a low credit score, low income, a high debt-to-income ratio (DTI), an unstable work history, or an inability to meet basic requirements.

Loan Declined Due to Affordability

Lenders need to make sure you will be able to afford the loan repayments. Not only now, but into the future. Your creditors will calculate your debts to see if you have enough left to afford your loan. Your creditors can also decline your loan due to irregular income.