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

FAQs

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

What can I do? 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.

Under the Equal Credit Opportunity Act, lenders must disclose the reason for denying your loan application as long as you inquire about it within 60 days of the decision. This is known as an adverse action notice. Knowing this information is key to developing an effective strategy to get approved next time.

Deciding when to reapply depends on why you were denied in the first place. Your lender will likely be able to tell you how long you should wait before submitting another application, but generally it's wise to hold off until you correct the circ*mstances that lead to your first denial.

The Bottom Line. Getting denied for a loan or credit card will not be recorded on your credit report, and it will not directly impact your credit scores. To improve the chances that you'll be approved for credit, you may want to take a look at your credit before you apply, and take steps to improve it if you need to.

If you don't meet those criteria, your loan application may be rejected and you'll need to wait to apply again. By waiting at least 30 days to reapply for a personal loan, you give yourself adequate time to improve your financial standing and boost whatever factors caused your denial in the first place.

Under the ECOA, it is unlawful for a lender to discriminate on a prohibited basis in any aspect of a credit transaction, and under both the ECOA and the FHAct, it is unlawful for a lender to discriminate on a prohibited basis in a residential real-estate-related transaction.

If the buyer fails to get approval for a mortgage, the buyer can terminate the contract and remain entitled to their earnest money deposit, basically holding the bank responsible for the failed process.

What is the number one reason mortgage applications are denied? ›

Bad credit

If this sounds like your financial situation, it's a likely reason why your mortgage loan was denied. So, if you're continuously making late (or missing) payments on credit cards — especially cards with high balances — you're making it worse.

You can reapply – but it's important you understand why you were rejected and deal with these issues first. If you try and quickly apply elsewhere without addressing the problems, you might be rejected again. Lots of failed applications can negatively affect your credit score.

No, denied credit applications won't appear on your credit report. Lenders don't report whether your applications were approved or denied because even approved applications don't necessarily result in a new account.

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.

Talk To Your Lender

The first step is to return to the source. If anyone knows why you've been denied a mortgage, it's going to be your lender. According to the Equal Credit Opportunity Act, lenders are required to tell you why you've been turned down, if credit played a role.

While the outcome of your application (approval/ rejection) is not recorded and has no direct bearing on your credit score, your credit report does have a list of recent loan enquiries along with details pertaining to your debts and repayment history.

First, find out what caused the lender to turn you down. If a lender rejects your application, it's required under the Equal Credit Opportunity Act (ECOA) to tell you the specific reasons your application was rejected or tell you that you have the right to learn the reasons if you ask within 60 days.

Lenders will often decline a loan if a person has no security or deposit to offer upon the application. In order to borrow large amounts of money, say for a home loan, a lender will often require some kind of security first. You may need to have a certain percentage saved of the amount you wish to borrow.

Getting rejected for a loan does not necessarily impact your credit score. But the actions that you take after your application gets rejected can definitely impact your credit score. For instance, you may get anxious after your application rejection and start applying for loans that you aren't even eligible for.