What Should I Do After Being Turned Down For A Home Loan?

Kyle Hiscock

Kyle Hiscock | Greater Rochester NY Real Estate | Pittsford NY Realtor at RE/MAX Realty Group

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Step By Step Directions To Follow After Being Turned Down For A Mortgage

What Should I Do After Being Turned Down For A Home Loan

What Should I Do After Being Turned Down For A Home Loan?

It’s inevitable that not every potential home buyer is going to get approved for a mortgage.  There are a variety of reasons why mortgages are denied.

Many buyers who are turned down for a home loan have no idea what to do after they’ve received the bad news that they aren’t able to finance a home right now.  In most cases, the reason why these buyers have no clue what to do next is that they’re not educated on the next steps.

If you’ve been turned down for a home loan, you need to know what steps you should be taking next in order to put yourself in position to get a home loan.  Below you’ll find out what you should be doing after being turned down for a home loan.

1.) Find Out Why You Were Turned Down For A Home Loan

It’s pretty common that a buyer who has been turned down for a home loan to have no idea why they were turned down.  The first step after receiving notice, frequently known as a declination letter, that you’ve been turned down for a home loan is to find out exactly why.

If you’re working with a reputable mortgage company, you should have no issue discovering why you were turned down.  As mentioned above, there are many reasons why buyers get turned down for a home loan and below are a few of the most common reasons.

  1. Poor credit
  2. No credit
  3. Too much debt
  4. Not enough money for a down payment and closing costs


It’s vital to the success of obtaining a home loan in the future that you find out exactly the reason for your denial.  If you don’t know the reason as to why your home loan was turned down, you won’t be able to setup a plan to work towards getting a mortgage pre-approval.

2.) Determine If There Are Other Home Loan Programs Available

There are a lot of different mortgage products available for buyers.  There are mortgage products that allow higher debt-to-income ratios, lower down payments, and lower credit scores.  It’s extremely important that as you’re working towards getting a home loan you fully understand how to determine which type mortgage is best for you.

If you’ve been turned down for a home loan, after you find out what the reason for your denial was, you need to see if there are other programs available that may work for you.  Depending on the mortgage company you’re attempting to get approved by, they may offer a lot of different products or possibly only a couple products.

A very popular FAQ about mortgages to consider asking a mortgage professional is the type of products they offer.  For example, if you’re turned down for a conventional loan, does the lender offer FHA loans or other programs that you could be approved for.

If you’ve been turned down for a home loan by a mortgage company who doesn’t offer a variety of products, you may consider talking with a couple different lenders.  It’s highly suggested that as you’re shopping for a home loan that you work with a local lender.

Working with a local lender is important because they understand what the local rules and procedures are in your area.  A fairly common reason why real estate transactions fall through is because a buyer decides to use a mortgage company who is not local to their area.  These nationwide mortgage companies often have no clue how the real estate market works in a respective city or state.

3.) Monitor Your Credit Score

Monitor Your Credit Score After Being Turned Down For A Home Loan

Monitor Your Credit Score After Being Turned Down For A Home Loan

Once you’ve found out why you were turned down for a home loan and have determined there are no other mortgage programs that’ll currently work for your situation, you now need to begin planning for the future.

Since issues with a buyers credit are often the culprit for mortgage denials, it’s critical that you monitor your credit score.  Arguably the biggest reason why monitoring your credit score is so important is because the higher a buyers credit score is, the lower their interest rate will be.

There are also credit score minimums that particular loans and lenders will require.  Keep in mind that each lender has different mortgage guidelines but the majority of lenders will have similar guidelines.  For example, many lenders will require that a buyer has a minimum of a 640 credit score to obtain an FHA mortgage.

There are several resources available that can help you monitor your credit score.  One of the most popular credit monitoring resource, which happens to be free, is Credit Karma.  As you’re working towards getting approved for a home loan, monitoring your credit score is vital.

4.) Ensure You’re Making On Time Payments

One of the best ways to ruin a credit score is to not make payments on debts or by making late payments.  After you’ve been turned down for a home loan, you must continue to make on time payments.

By making on time payments you’re going to continue to boost your credit scores.  In addition to making payments on debts such as credit cards and car loans, it’s just as important to pay other bills such as cell phone bills or utility bills on time.

The reason why paying a cell phone bill or utility bill on time is because it’s possible a lender maybe able to use these on time payments as an alternative source of credit.  This is important for buyers who don’t have enough established credit, which is another a reason a buyer is turned down for a home loan.  Recently while selling a home in Henrietta NY, a buyer needed alternative sources of credit to qualify for their mortgage because they didn’t have enough established credit.  The mortgage lender was able to use the borrowers monthly rent and cell phone payments as alternative sources to get them approved for the home loan.

5.) Watch Your Credit Utilization

While you’re actively working towards getting approved for a mortgage after being turned down, make sure you watch your credit utilization.  Credit utilization is the percentage of available credit you’re currently using, which also can impact a credit score.

Credit utilization can be figured out quite easily.  If you have a total of 3 credit cards, each with a $5,000 limit, you have a total of $15,000 available credit.  If you currently have a balance of $7,500 on these 3 credit cards, you’re credit utilization is 50%, which is high.  Ideally, you want your credit utilization to be under 7-10%.

Avoid the common thought process that opening up more credit lines to improve your overall available credit is a good idea.  While increasing your available credit may lower your credit utilization, it’s also likely putting hard inquiries on your credit which can be detrimental to the chances of getting approved for a mortgage.

7.) Save Money For Your Home Purchase

Save Your Pennies - Step-By-Step Directions To Follow After Being Turned Down For A Home Loan

Save Your Pennies – Step-By-Step Directions To Follow After Being Turned Down For A Home Loan

As you’re continuing to monitor your credit score, make on time bill payments, and watching your credit utilization, use this time to begin saving for your home purchase.  Depending on your circumstances, it’s possible you may be able to be approved for a mortgage in just a few short months!

A huge mistake that I see made by potential buyers who’ve been turned down for a home loan is that they don’t save their money.  These buyers feel like there is no reason to save money for a home since they’re not “actively” working towards buying a house.  What these buyers don’t realize is that getting a mortgage takes preparation.

There are dozens of tips for preparing to get a mortgage, whether you’ve been turned down for a mortgage or not.  It’s not as simple as walking into a lender and walking out with thousands of dollars.

Many of these buyers also don’t realize there are a variety of costs they’ll be facing when they’re able to get a home loan.  A common misconception is that the only cost of buying a home is the down payment, but this is not the case.

Bottom line, even though you may have been turned down for a home loan, you need to begin saving money and planning for your future home purchase.

8.) Believe In Yourself & Continue Learning

If you’ve been turned down for a home loan, don’t feel like your the first person.  The last step, but certainly not the last in importance, is to continue to believe in yourself and continue learning about buying a home.

Getting down and feeling sorry for yourself because you were turned down for a home loan is not going to get you anywhere.  Continue to stay positive, believe in yourself, and work towards obtaining your home loan.  It will happen!

After all, owning a home is the “American Dream,” as well as an excellent way to add a strong asset.  The opportunity also exists to build equity in a home which improves your overall financial worth!

While staying positive, continue to learn about the process of buying a home.  If you’re a first time home buyer, continue reading articles and tips for buying your first home.  With the abundance of information available via the internet, you should be able to find a ton of great information.

Other Top Home Buying Resources

Have you been turned down for a home loan in Rochester NY?  Remember, if you’ve been turned down, you still can purchase a home in the future but you’ll need to work towards it.  The above 8 tips should provide you an excellent blueprint to getting yourself ready to obtain a home loan.  If you don’t have a top Realtor in Rochester NY yet, contact me so we can work together to get you ready to get a home loan.

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About the authors: The above article “What Should I Do After Being Turned Down For A Home Loan?” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.

We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.

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