Common reasons
Credit score or pricing. Lender minimums vary, and lower scores price poorly.** Debt to income.** Automated approvals cap around 50%.** Waiting periods.** Four years after Chapter 7, seven after foreclosure.** Condo project issues.** Income documentation, especially self employment.
Fixes that often work
Rapid rescore after paying down balances or correcting errors.** Excluding debts** others pay, or installment loans with 10 or fewer payments left.** Choosing Fannie Mae vs Freddie Mac** based on which rules fit your file, especially student loans. See Fannie Mae vs Freddie Mac.** Adding reserves** or a co borrower.** Adjusting the loan amount** or down payment.** Switching to HomeReady or Home Possible** if your income fits.
Where else to look
FHA accepts lower scores and more debt.** VA** uses residual income and has shorter waits.** USDA** may fit in eligible areas with moderate income and low debt.** Non QM** works for self employed borrowers and unique properties. Another program may fit, but none approves automatically. See compare loans, DTI by loan and waiting periods by loan.
What I do with a conventional denial
First, I find out exactly why. Then I check whether the file was set up correctly, whether a different lender's overlays fit, and whether another program is simply a better match. Sometimes the fix is a rapid rescore. Sometimes it's FHA now and conventional later. A denial is information, not a verdict.
A refer isn't always final
Correcting data, a rapid rescore or restructuring can change automated findings. See AUS findings explained.
Denied conventional, approved FHA
Ray's conventional application was declined at a 53% debt ratio. FHA's automated system approved the same file, and he closed with plans to refinance into conventional later.
Fannie said no, Freddie said yes
Tasha's file failed on debt ratio under one agency's student loan rule. Run under the other agency's guidelines with her documented payment, her ratio fit and the file approved.
Frequently asked questions
Why was my conventional loan denied?
Usually credit, debt to income, waiting periods, condo issues or income documentation.
Can FHA approve what conventional denied?
Sometimes, since FHA allows lower scores and more debt.
Should I reapply?
After addressing the reason, or with a program that fits.
Does a denial hurt my credit?
Only the inquiry appears.