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Top Three Reasons Why Your Mortgage Gets Denied

The leading reasons for mortgage denials, researchers found:

  • Debt and credit history: 33% of potential borrower’s debt-to-income ratios and 23% of credit history (which includes credit score) was the chief reason for denied mortgage loans. Don't buy large ticket items just before you apply for a loan and don't let anyone run credit reports unless you are serious about moving forward with a loan application.

  • Inspections and appraisals: 17% centered on collateral.If a seller doesn't want to pay for repairs, the lender may deny the loan. A few examples of potential issues are: Section I items that need to be repaired, a foundation issue, illegal add ons with no permits.

  • Incomplete applications: About 13% of applicants were denied because their applications were incomplete; 8% had unverifiable information contained within their application. Seems a bit surprising if someone is applying for a loan but it happens all the time. Be prepared and get your documents into the lender as soon as requested.

Top Three Cities with the Highest Denial Rate:

Miami, Fla.

  • Denial rate: 11.6%. Leading cause of denials: The leading cause of rejection in Miami is debt-to-income ratio, which was cited in 32.4% of failed loan applications. Collateral was next at 22.7%.

Orlando, Fla.

  • Denial rate: 10.9%. Leading cause of denials: Debt-to-income at 36.5%, then credit history at 18.8%.

Tampa, Fla.

  • Denial rate: 9.5%. Leading cause of denials: Debt-to-income at 33.1%, then collateral at 19.1

Source: “LendingTree Analysis Reveals Mortgage Denials at Cycle Low,” LendingTree (Oct. 7, 2019

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