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What To Do When You Get a No

By David Reed

In today’s lending environment, most loans today are approved or not using an automated underwriting system, or AUS. When you submit an application, typically online, your file is run through the AUS to reach a decision. You’ll get an approval or sometimes you won’t. If the AUS approves you, you move on. If the AUS doesn’t issue an approval, it doesn’t mean all is lost.You just need to take some action.

The first is simply to find out why the AUS did not issue an approval. While this seems obvious, the AUS will list why the loan was declined. Many times it’s for mistakes on  your credit report. Too often, mistakes appear but borrowers don’t know that until after a loan application has been submitted. Mistakes, unfortunately, are common on credit reports. One of these common mistakes comes when someone else’s credit appears on your report. Often this happens because names are similar. If your name is John H. Doe, then it’s possible John I. Doe’s info shows up. This can be corrected by providing the credit reporting agency with documentation showing you’re John H., not John I.

If there is negative information on your report and it is in fact yours, there are some things you can do. The first and obvious response is to fix whatever is wrong. If there’s a missing payment showing up, simply pay it. If there are any other negative items, get those repaired as well and then resubmit your application.

You can also just try another lender. Mortgage companies approve loans using an AUS but they can also add additional requirements on their own. These are called overlays. Not all lenders have the same overlays. Some have none, some a few and some more than a few. If you get turned down, it might be simply a matter of going elsewhere. For instance, if mortgage markets ask for a minimum 600 credit score, another lender might require a 620. If you get turned down because of your credit score, it might be a matter of going to a lender with less strenuous overlays.

If you get turned down because of debt to income ratios, you might try to get a co-borrower to help out. Lenders can use co-borrower income in addition to your own to help bring down overall debt ratios. Just know that the co-borrowers will have to qualify using their own income as well as their current debt. Sometimes a co-borrower can’t help because being obligated for your mortgage in addition to what they already owe pushes their own ratios too high. 

Finally, try looking at another type of loan program. If your ratios are too high using a 15 year loan, look at 30 year loans. 30 year loans will have lower monthly payments compared to a 15 year term. These options are things your loan officer can help you with. Your loan officer is there to help get you approved. Don’t try getting approved without the help of a mortgage loan officer. That’s their job and they do it every day.