What to do if your mortgage application has been refused?
So you saved a stack of money for a down payment for a house, researched mortgage lenders, and applied for a home loan, only to get a big no in return. And now you’re about to cry, scream, or give up ownership altogether.
There are different reasons why a mortgage lender may choose to deny you a home loan. If you’ve been rejected, here are three essential things to do.
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1. Boost your credit score
> A minimum credit score of 620 is required to qualify for a conventional mortgage. But some lenders may choose to set higher standards. If your credit is poor or fair, this could be the reason you were denied a mortgage. Raising your credit score could be your ticket to getting your next application approved.
You can take several steps to increase your credit score. First, make sure you pay all incoming bills in a timely manner. Second, pay off some credit card debt if possible. This will lower your credit utilization ratio, which is an important factor in calculating your credit score. Finally, check your credit report carefully and if you spot any errors that could lower your score, work to get them corrected.
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2. Pay off existing debt
Your credit score isn’t the only number a mortgage lender will pay attention to. Your debt ratio is just as important. This ratio measures the amount of existing debt you have relative to your income. And as you can imagine, the higher this ratio, the less likely you are to be approved to borrow for a home, because that means you are already borrowing a lot.
You can take two steps to lower your debt ratio: pay down your debts and increase your income. Both are worth doing. But if you’re able to eliminate some specific credit card debt, that could also help your credit score improve, so that’s definitely something you’ll want to make in this situation if possible.
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3. Get a side job
There is no single income requirement to qualify for a mortgage. This is because the income you will need will depend on the specific amount you wish to borrow. But if you’re able to supplement your income through a side hustle, you might put yourself in a better position to qualify for a mortgage the next time you apply.
Mortgage lenders usually consider your different sources of income when considering applying for a home loan. And if you can prove that your side hustle is steady and consistent, it might just end up being just the thing that gets you the loan you’ve been looking for.
Being denied a mortgage can be demoralizing. But rather than letting that rejection get you down, focus your energy on the things you can do to turn that no into a yes. If you’re willing to put in the effort, you could very well be setting yourself up for success on the mortgage front.
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