Mortgage Denied? Here's Exactly What to Do Next
A denial is not the end — it's a roadmap. Most borrowers get approved within 3-12 months of fixing the real issue.
Emily Chen
NMLS #345678 · Certified Mortgage Planning Specialist
10 years helping denied borrowers identify root causes, fix qualifying issues, and get approved. Expert in credit repair, DTI optimization, and lender selection strategy.
Do These 5 Things Immediately After Denial
- 1Request the written denial notice — lenders must provide it within 30 days (ECOA law)
- 2Read the specific denial reasons carefully — this is your action plan
- 3Pull your free credit report at AnnualCreditReport.com if credit was a factor
- 4Do NOT apply with multiple other lenders yet — fix the issue first
- 5Call a HUD-approved housing counselor (free at 1-800-569-4287)
After fixing the root cause: → compare lenders that specialize in your situation.
6 Most Common Denial Reasons — And How to Fix Each
1. Credit Score Too Low
Score below 580 (FHA) or 620 (conventional)
How to fix it:
- ✓Pay down credit card balances to below 30% utilization
- ✓Dispute errors on your credit report (can add 10-50 points)
- ✓Become an authorized user on a family member's old account
- ✓Avoid opening new credit accounts
- ✓Consider FHA if conventional denied you — FHA accepts 580+
2. Debt-to-Income Ratio Too High
DTI above 43-50% depending on loan type
How to fix it:
- ✓Pay off or pay down high-balance debts (car loans, credit cards)
- ✓Pay off installment loans with <10 payments remaining
- ✓Add a co-borrower with income but little debt
- ✓Increase income (raise, second job, rental income)
- ✓Choose a less expensive home to lower the proposed mortgage payment
3. Insufficient Income / Employment History
Less than 2 years employment, job gaps, recent job change
How to fix it:
- ✓Wait until you have 2 years at current employer (or same field)
- ✓Document all income sources with paper trail
- ✓Self-employed: file 2 years of tax returns showing stable income
- ✓Get a co-borrower with stable employment history
- ✓Explain employment gaps with a letter of explanation
4. Insufficient Down Payment / Assets
Not enough verified funds for down payment + closing costs
How to fix it:
- ✓Apply for down payment assistance programs in your state
- ✓Use gift funds from family (with proper gift letter)
- ✓Look into 1% down or 3% down programs
- ✓Consider VA (0% down) or USDA (0% down) if eligible
- ✓Continue saving — document all deposits to avoid sourcing issues
5. Property Issues
Low appraisal, property condition, non-warrantable condo
How to fix it:
- ✓Negotiate a lower purchase price to match the appraisal
- ✓Request a second appraisal if you believe the first was wrong
- ✓Ask seller to make required repairs before closing
- ✓Switch loan types (FHA has stricter property standards than conventional)
- ✓Find a different property that meets lending guidelines
6. Incomplete / Inaccurate Application
Missing documents, unexplained deposits, inconsistent info
How to fix it:
- ✓Gather all requested documents immediately
- ✓Write a letter of explanation for large deposits or employment gaps
- ✓Ensure all information on the application is accurate
- ✓Work with a mortgage broker who can guide documentation
- ✓Reapply with complete documentation
Should You Try a Different Lender?
Different lenders have different overlays (internal requirements stricter than the loan program minimums). One lender's denial doesn't mean all lenders will deny you.
Try another lender if:
- ✓ Your credit score is at or above the program minimum
- ✓ Your DTI is within program guidelines
- ✓ The denial was due to lender-specific overlays
- ✓ A mortgage broker can find a better-fit lender
Fix the issue first if:
- ✗ Your credit score is below program minimums
- ✗ Your DTI is above 50% (even FHA has limits)
- ✗ You have insufficient income documentation
- ✗ You lack sufficient down payment funds
Get a Second Opinion — Free
One denial doesn't mean all lenders will say no. Compare multiple lenders to find the one that fits your profile.
Fixed your issue? Find lenders that work with your specific profile.
Some lenders specialize in higher DTI, lower credit, or recent job changes. Compare in 3 minutes.
Frequently Asked Questions
What should I do immediately after my mortgage is denied?
Immediately after denial: (1) Request the written denial notice (lenders are legally required to provide one within 30 days). (2) Read the specific denial reasons carefully. (3) Request a copy of your credit report if credit was a factor. (4) Do NOT apply with multiple lenders simultaneously — fix the issue first. (5) Consult a HUD-approved housing counselor for free guidance.
How long after mortgage denial can I reapply?
There is no mandatory waiting period after a mortgage denial — you can reapply immediately if the issue is fixable quickly (e.g., missing documents). However, if the denial was due to credit score or DTI, wait until you've genuinely fixed the issue (typically 3-12 months). Applying repeatedly without fixing the root cause wastes hard inquiries and time.
Can I appeal a mortgage denial?
Yes. You can provide additional documentation or a letter of explanation to address the lender's concerns. However, most denials are not overturned on appeal — it's usually more effective to fix the underlying issue and either reapply with the same lender or apply with a different lender that has more flexible guidelines.
Does a mortgage denial hurt my credit score?
The denial itself does not hurt your credit score. The hard inquiry from the application typically drops your score 5-10 points temporarily. Multiple mortgage applications within a 14-45 day window count as a single inquiry under FICO's rate-shopping rules, so shopping multiple lenders simultaneously minimizes impact.
What is the most common reason for mortgage denial?
The most common reasons for mortgage denial in 2026 are: (1) Credit score too low — accounts for ~30% of denials. (2) Debt-to-income ratio too high — ~25% of denials. (3) Insufficient income or employment history — ~20%. (4) Insufficient down payment or assets — ~15%. (5) Property issues (appraisal, condition) — ~10%.