CTeBockhorst's Blog

The Mortgage and Real Estate Scoop

  • Home
  • About
  • Blog
  • Resources
    • Calculators
    • Download My eGuide Today!
    • First Time Buyer Tips
    • First Time Seller Tips
    • Loan Checklist
    • Loan Process
    • Loan Programs
    • Home Appraisal
    • Home Inspection
    • What to Expect at a Loan Closing: A Step-by-Step Guide
  • Apply
  • Reviews
    • Read My Reviews
    • Zillow Reviews
    • Leave a Review
  • Contact

What To Do When Your Mortgage Loan is Declined

May 22, 2025 by Coleen TeBockhorst

Getting turned down for a mortgage can be discouraging, but it doesn’t mean the dream of homeownership is over. In fact, understanding why your application was declined is the first step toward making a stronger comeback. Let’s look at some of the most common reasons a mortgage might be denied and what you can do about it.

1. Loan-to-Value (LTV) Ratio
Your loan-to-value ratio is the percentage of the property’s appraised value that you want to borrow. For instance, if you’re buying a $300,000 home and requesting a $270,000 loan, your LTV is 90%.

Lenders typically prefer a lower LTV because it means you’re less of a risk. If your LTV is too high, consider increasing your down payment or looking into mortgage insurance. While mortgage insurance adds to your monthly cost, it can be a path to loan approval in some cases.

2. Debt-to-Income (DTI) Ratio
Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. If you’re using too much of your income to cover existing debts, such as credit cards, car loans, or student loans as it can raise a red flag for lenders.

A general rule of thumb is to keep your total DTI ratio under 43%, though the lower, the better. If your DTI is too high, you may need to reduce your debt before reapplying. Paying off credit cards or consolidating loans can help lower this number.

3. Credit Challenges
Poor credit or no credit can significantly impact your ability to get a mortgage. Late payments, collections, or a limited credit history make it harder for lenders to assess your reliability.

If this is the case, take time to repair your credit. Pay all bills on time, reduce outstanding balances, and consider using secured credit cards to rebuild your profile. For those with little credit history, lenders may look at alternative data, like on-time rent or utility payments, to assess your reliability.

4. Incomplete Documentation or Employment Issues
Sometimes, a loan is denied simply because the paperwork wasn’t complete, or income and employment history couldn’t be verified. Make sure you’re providing accurate, complete information. If you’re self-employed, you may need additional documentation to prove consistent income.

5. The Property Itself
Occasionally, it’s not your finances that are the problem, it is the property. If the appraisal comes in low or there are issues with the condition of the home, the loan may be denied.

In that case, you might be able to renegotiate the purchase price, ask the seller to make repairs, or walk away and find a property that meets lending standards.

Don’t Give Up!
A mortgage denial doesn’t mean you can’t buy a home. It just means you might need to make a few changes and try again. Talk to your loan officer about what went wrong and how to fix it. With the right guidance, you’ll be better prepared for approval next time, and one step closer to the keys to your future home.

Filed Under: Mortgage Tips Tagged With: Home Buying Journey, Mortgage Declined, Mortgage Tips

Contact Coleen

Coleen Tebockhorst

Coleen TeBockhorst
coleen.tebockhorst@citywidehm.com

Senior Loan Officer

Call me! (612) 701-8512

NMLS #274205

Download My Mortgage eGuide today

CW Home Mortgage logo_White

Guaranteed Rate, Inc. DBA Citywide Home Mortgage

Categories

Our Location

9815 S. Monroe Street Suite 106-A
Sandy, UT 84070

Connect With Me

This site is not authorized by the New York State Department of Financial Services. No mortgage loan applications for properties located in New York will be accepted through this site. Operating in the state of California as Guaranteed Rate, Inc. D/B/A Citywide Home Mortgage. If you are a California resident, please review our Privacy Policy to learn more about the categories and business purpose of personal information we may collect and your right to opt-out from the sale of personal information.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply. All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Citywide Home Mortgage does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Citywide Home Mortgage. Citywide Home Mortgage, its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.

Coleen TeBockhorst NMLS ID: 274205 Copyright © 1998-2025 Guaranteed Rate, Inc. D/B/A Citywide Home Mortgage. All rights reserved.

For licensing information, go to: www.nmlsconsumeraccess.org.

NMLS License #2611 – 3940 N Ravenswood Chicago, IL 60613. (866) 508-5515. Equal Housing Lender.

Licensing | Privacy | Terms of Use

Copyright © 2025 · Powered by MySMARTblog

Copyright © 2025 · Genesis Sample Theme on Genesis Framework · WordPress · Log in