Turned Down for the Loan?

You’ve applied and waited with great anticipation. You made sure to dot all of the “i’s” and cross all the “t’s”. The verdict comes back: denied. You feel disappointed; possibly even insulted. But what can you do if the lender has turned you down? Actually, there are several options which are available.

Just because you were turned down for your loan doesn’t mean you have absolutely no chance of obtaining the financing that you need. One of the first things to do is to ask the lender to detail exactly why your loan application was denied. It may have been something that can be easily corrected so that the loan can be resubmitted to the underwriter and approved. If it’s something that isn’t correctable, or the lender isn’t willing to try to resubmit it, you’ll receive a written statement of credit denial that will list the reasons.

If you think that you still may be able to get the loan, go to another lender and explain the situation to them; give them all of the facts and the reasons why you were denied. It’s possible that the original lender may even help you to find another financing source. If the other lender thinks that the loan can be done, you should request that your loan package be transferred from the original lender. Although under no obligation to comply with your request (except with FHA or VA loan packages), the original lender should do everything in its power to assist you if it values its good name and reputation in the community.

With all of the different types of mortgage loans available from most lenders today, just about the only way that financing can’t be found is if you have absolutely hideous credit, are deep in debt and are flat broke. Of course, when seeking financing, the progression that you should follow is the preferred loan for which you first applied, then the next best alternative, and so on down the list until you find one which fits your situation or you run out of options for you to qualify for. If the problem is such that no lender will approve you, sit down with the lender and find out exactly what you need to do to correct the problem and how long you’ll need to wait before you can apply again. One of the main pieces of advice that you’re likely to receive will be to do everything in your power to clean up your credit report.

What do you lose by being rejected? If you’ve paid a nonrefundable application fee with your application you can kiss that amount goodbye. Lenders usually include credit report and appraisal fees in this amount, and possibly some fee income for themselves. However, it’s possible that with computerized underwriting you may not have been required to pay anything out-of-pocket at application. Just remember that if any fees are required up-front, find out beforehand if any portion is refundable if you’re rejected, and get it in writing.

Will the loan denial have an effect on your credit? No, it won’t. Being denied for a loan is not bad credit in itself (although it usually stems from bad credit). Nothing on your credit report will ever show that you were turned down for a loan. So remember that all isn’t lost. Keep trying. Very few borrowers are completely hopeless.

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