Mortgage DenialUpdated February 22, 2026

Mortgage Denied? 10 Reasons Why & How to Fix Each One (2026)

Q: What is the most common reason for mortgage denial?

The most common reasons for mortgage denial are: high debt-to-income ratio (DTI over 43-50%), low credit score (below 580-620 depending on loan type), insufficient down payment or assets, unstable employment history, and low property appraisal. DTI issues account for approximately 30% of all denials.

Getting denied for a mortgage is devastating — but it's not the end. Most denials are fixable in 30-90 days. Here are the 10 most common reasons and exactly what to do about each one.

Sarah Mitchell

VA Loan & First-Time Buyer Specialist · 12 years experience

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First: Read Your Adverse Action Notice

By law (ECOA), lenders must send you an Adverse Action Notice within 30 days of denial. This letter states the specific reason(s) for denial. This is your roadmap — address exactly what it says before reapplying.

The 10 Most Common Mortgage Denial Reasons (& How to Fix Them)

High Debt-to-Income Ratio (DTI)

~30% of denials

What it means: Your monthly debt payments (mortgage + all other debts) exceed 43-50% of your gross monthly income. Most conventional loans cap at 45% DTI; FHA allows up to 50%.

How to fix it: Pay off high-balance debts (car loan, student loan, credit cards). Even eliminating one $400/month payment can drop DTI by 3-5%. Don't take on new debt. Consider a co-borrower to add income.

Fix timeline: 1-6 months

Low Credit Score

~25% of denials

What it means: Your FICO score is below the lender's minimum: 580 for FHA (3.5% down), 620 for conventional, 640 for USDA.

How to fix it: Pay down credit card balances below 10% utilization (+30-50 pts in 30 days). Dispute errors on your credit report. Become an authorized user on a family member's old card. Use Experian Boost.

Fix timeline: 30-90 days

Insufficient Down Payment or Assets

~15% of denials

What it means: You don't have enough for the down payment, closing costs, or required cash reserves (typically 2-3 months of mortgage payments).

How to fix it: Apply for down payment assistance programs (many offer $5K-$25K). Ask family for gift funds (allowed on FHA/conventional). Look into USDA or VA loans for 0% down. Save aggressively for 3-6 months.

Fix timeline: 3-12 months

Unstable Employment History

~10% of denials

What it means: You recently changed jobs, are self-employed with less than 2 years of history, or have gaps in employment. Lenders want 2 years of stable employment in the same field.

How to fix it: If you changed jobs in the same field, many lenders will approve you. If you changed industries, wait 6-12 months. Self-employed: document 2 years of tax returns showing stable/growing income.

Fix timeline: 6-24 months

Low Property Appraisal

~8% of denials

What it means: The home appraised for less than the purchase price. Lenders will only lend based on the appraised value, not the purchase price.

How to fix it: Negotiate the seller down to the appraised value. Request a Reconsideration of Value (ROV) with supporting comps. Pay the gap in cash. Walk away and find a better-priced property.

Fix timeline: 1-4 weeks

Incomplete or Incorrect Documentation

~7% of denials

What it means: Missing documents, inconsistent information, or unexplained large deposits in your bank accounts.

How to fix it: Gather all required documents: 2 years W-2s/tax returns, 2 months bank statements, 30 days pay stubs, photo ID. For large deposits, have a paper trail (gift letter, sale receipt, etc.).

Fix timeline: 1-2 weeks

Too Much Debt (Collections/Judgments)

~5% of denials

What it means: Outstanding collections, judgments, or tax liens on your credit report. FHA requires collections over $2,000 to be paid or in a payment plan.

How to fix it: Pay off collections and get written confirmation of deletion. For tax liens, set up an IRS payment plan (some lenders accept this). Judgments must typically be paid before closing.

Fix timeline: 1-3 months

Property Issues (Condition/Type)

~3% of denials

What it means: The property has structural issues, health/safety hazards, or doesn't meet lender guidelines (e.g., FHA won't approve homes with peeling paint, broken windows, or non-functional systems).

How to fix it: Ask the seller to make required repairs before closing. Use an FHA 203(k) rehab loan to finance repairs. Switch to conventional financing with less strict property requirements.

Fix timeline: 2-6 weeks

Recent Bankruptcy or Foreclosure

~2% of denials

What it means: You have a recent bankruptcy or foreclosure. Waiting periods: FHA: 2 years after Chapter 7, 1 year after Chapter 13. Conventional: 4 years after Chapter 7, 7 years after foreclosure.

How to fix it: Wait out the mandatory period while rebuilding credit. FHA has the shortest waiting periods. VA loans: 2 years after Chapter 7. Document extenuating circumstances for possible exceptions.

Fix timeline: 1-7 years

Wrong Lender for Your Situation

~5% of denials

What it means: Some lenders have stricter overlays (internal requirements above the minimum). A denial from one lender doesn't mean all lenders will deny you.

How to fix it: Apply to a different lender type. If a big bank denied you, try a credit union or mortgage broker. If a conventional lender denied you, try FHA. Brokers have access to 40+ lenders and can find one that fits your profile.

Fix timeline: Immediate

Try a Different Lender Before Giving Up

One lender's denial doesn't mean all lenders will deny you. Compare multiple lenders — each has different requirements.

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Your 30-Day Action Plan After Denial

Day 1-3

Read your Adverse Action Notice carefully. Identify the exact reason(s) for denial.

Day 3-7

Pull all 3 credit reports (free at AnnualCreditReport.com). Dispute any errors immediately.

Day 7-14

Address the primary denial reason: pay down debt, gather missing documents, or consult a mortgage broker.

Day 14-21

Talk to a HUD-approved housing counselor (free service). They can review your situation and advise on next steps.

Day 21-30

Apply with a different lender or loan type (FHA if conventional denied, broker if bank denied). Don't wait if the issue is fixed.

Frequently Asked Questions

What is the most common reason for mortgage denial?

The most common reasons are: high debt-to-income ratio (DTI over 43-50%), low credit score (below 580-620), insufficient down payment or assets, unstable employment history, and low property appraisal. DTI issues account for approximately 30% of all denials.

Can I reapply for a mortgage after being denied?

Yes. There is no mandatory waiting period to reapply after a mortgage denial. However, you should address the specific reason for denial before reapplying. Most issues can be resolved in 30-90 days. Reapplying too quickly without fixing the underlying issue will result in another denial.

Does a mortgage denial hurt your credit score?

The denial itself does not hurt your credit score. However, the hard inquiry from the mortgage application does lower your score by 3-5 points temporarily. If you shop multiple lenders within 14-45 days, all mortgage inquiries count as one inquiry for scoring purposes.

How long after mortgage denial can I reapply?

You can reapply immediately, but it's better to wait until you've fixed the issue. For credit score issues: 30-90 days to improve. For DTI issues: pay down debt first (1-3 months). For employment issues: wait until you have 2 years at new job.

Don't Give Up — Try a Different Lender

Every lender has different requirements. A denial from one doesn't mean all will deny you. Compare multiple lenders now.

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