What to do when the lender says no
Julie Garton-Good, GRI

You've applied for the mortgage loan, but the lender says you just don't qualify. Can anything be done? You bet!

Let's identify steps you can take to turn a lender's no into a go toward your dream home.

First of all, don't take the rejection personally. Even though this is more easily said than done, it might be that the lender is being overly restrictive in their guidelines, or prefers to make only certain types of loans. The lender's goal is to lend money, but sometimes the lender-borrower fit just doesn't work. Since both parties have a certain amount of time, energy and money wrapped up in this relationship, analyze the situation with the following questions:

  1. Ask specifically why the loan is being turned down. Is the problem with you, the borrower, or is it the property? If you're weak on loan qualifying, would a larger down payment make a difference? How about if you reduced some of your debt? Would another loan program help you qualify? Asking specific questions can get you specific answers on what needs to be changed and why.
  2. If it's been a while since you first applied for the loan, be sure to update the lender on any changes in your financial picture. Perhaps you failed to tell her about the pay increase that's coming or the bonus you're getting. Pay increases that will be effective within sixty days after closing can be included in your qualifying income.
  3. Ask the lender if she could make the loan and hold it "in portfolio" (this means keep it in-house and not sell it to outside investors). This could give you greater qualifying flexibility since the loan may not have to meet strict underwriting guidelines required by outside investors.
  4. If the lender says she still can't make the loan, as a last ditch effort, try another lender. You'll have time and money invested in a credit report, appraisal, and other upfront costs, so explore all options with this lender first. It could be that the lender's policies won't allow the flexibility that you need.

Lenders are in the business of lending, and really do want to make loans. They dislike saying "no" even more than the buyer objects to hearing it! It's up to the borrower and the lender to work together as a team to uncover options in navigating through the mortgage lending process.