What to Do If You Can’t Get Pre-Approved for a Mortgage

Buying a home is an exciting milestone, but the journey isn’t always easy. One of the first steps is getting a mortgage pre-approval, which signals to sellers and real estate agents that you’re a serious buyer.

However, not everyone gets approved, especially first-time homebuyers, and there are many reasons why an application might be denied. If this happens, it’s natural to feel discouraged, but it doesn’t mean homeownership is out of reach. What matters most is understanding why your pre-approval was turned down and then taking the right steps to strengthen your financial profile. By doing so, you’ll improve your chances and be ready to reapply with greater confidence.

In this blog, we’ll walk you through what to do if your mortgage pre-approval gets denied and how to turn the setback into an opportunity.

What to Do if Your Mortgage Application Is Denied

Sometimes, a lender may reject your mortgage application. In such cases, you’ll receive a denial letter outlining the reasons for refusal. This letter will also include the name of the credit reporting agency whose report was used to evaluate your application.

So, what should you do next? Here are a few important steps to consider:

1. Contact Your Loan Officer

Mortgage denials can feel discouraging, especially for first-time homebuyers, but they’re often just part of the process. The first step you should take is to speak with your loan officer.

Loan officers usually review your pre-approval checklist and application thoroughly, so they’re familiar with any potential red flags. If your application is denied, scheduling a meeting with them is the best way to understand exactly why. They can walk you through the reasons for the denial and may even suggest ways to address those issues, helping you work toward re-qualification.

2. Explore Other Loan Options

One of the positives of today’s housing market is that there are several types of loans available for homebuyers. If you’ve been denied a conventional loan, you may still qualify for alternatives such as FHA, USDA, or VA loans.

Before reapplying, make sure you understand the differences between these loan types—VA vs. USDA vs. FHA vs. conventional—so you know which one best fits your financial situation. It’s also wise to discuss these options with your lender to see if they’re open to considering them.

For added guidance, you can work with a mortgage expert like Total Mortgage, who can help you connect with the right lenders and walk you through the process for the best results.

3. Examine Your Credit Report

Your credit score is one of the most important factors in the mortgage process. It not only determines the type of loan you may qualify for but also impacts the interest rate you’ll be offered. If your application is denied, it’s a good time to take a closer look at your credit score and carefully review your credit report.

Check for any inaccuracies or errors that could be lowering your score. Beyond that, focus on improving your credit health by making a few key changes:

• Pay your credit card and other bills on time.

• Work toward reducing debts and clearing outstanding balances.

• Avoid taking on new loans or lines of credit.

• Use trusted credit monitoring apps to track and improve your score.

By making consistent progress, you’ll build a stronger credit profile & improve your chances of approval the next time you apply.

4. Reduce Your Debt-to-Income (DTI) Ratio

Along with your credit score, lenders also pay close attention to your debt-to-income (DTI) ratio. The ratio shows what percentage of your income goes toward debt payments. This includes credit card bills, mortgage or rent, student loans, car loans, and more.

A high DTI signals to lenders that much of your income is already tied up in debt, which can make it harder to take on a mortgage. To improve your chances of approval, work on lowering your DTI—most effectively by paying off outstanding debts.

In the U.S., a DTI below 43% is generally considered the threshold for mortgage approval. Keeping your ratio lower not only makes you more attractive to lenders but also gives you greater financial flexibility as a homeowner.

5. Apply with a Different Lender

One lender rejecting your application doesn’t mean you can’t try with others. Keep these tips in mind:

• Wait before reapplying – Even though there’s no official limit on how soon you can apply again, it’s smart to give it some time. Each application calls for a credit check, which can temporarily impact your score.

• Explore different lender types – Consider banks, credit unions, and online lenders. A good rule of thumb is to apply with at least three lenders at the same time for better chances and comparisons.

• Consider a co-signer – If you’re a first-time homebuyer, young, in college, or just starting your career, having a co-signer can strengthen your application.

What Is a Denial Letter for a Mortgage?

The denial letter you receive from a lender is also called an adverse action notice. It usually includes:

• The reason for denial could relate to your financial health, income, employment history, or other factors.

• The credit report is considered, and the credit bureau that provided it.

• Details of your rights under the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA), including how to request a free copy of your credit report.

• Contact information for the lender or representative so you can discuss the decision and next steps.

• In some cases, information is available on how to reapply for reconsideration.

Why Was My Mortgage Application Denied?

There are several reasons why your mortgage application may be denied. These include:

• Low credit score or poor credit report – Lenders may view you as a high-risk borrower.

• Frequent job changes – Lenders prefer applicants with stable employment and consistent income. Applying right after starting a new job can increase the chances of rejection.

• High DTI ratio – A higher debt-to-income ratio is seen as a risk factor since it raises doubts about your creditworthiness.

• Unaccounted cash deposits – Large sums of cash without a clear explanation can be a red flag, leading to denial.

• Appraisal gap on the property – If the property you want to buy doesn’t appraise at the expected value or has issues, lenders may refuse approval.

What Are the Chances of Getting Denied After Pre-Approval?

A pre-approval does not guarantee that your loan will go through. You can still be denied a mortgage. It’s important to understand that pre-approval is not the same as final loan approval; it is simply an initial agreement between you and the lender for a specific loan amount on a proposed property.

In most cases, having a pre-approval does lead to final approval. However, last-minute changes can still cause rejection. For example, if the lender finds issues with the property’s appraisal or if you change jobs after receiving pre-approval, your mortgage application may be denied.

Have more questions about mortgage pre-approvals and rejections? Speak with our experts at Total Mortgage today.