Applying for a Mortgage? Here Are the Top Reasons Mortgage Apps Are Denied

January 3, 2021

According to a study by Lending Tree, about one in every 10 persons applying for a mortgage gets turned down. The study’s findings were based on data taken from more than 10 million recent mortgage applications.

While one in 10 may seem like a lot, it’s actually the lowest rate for mortgage denials in 20 years. The denial rate is currently around 9.8%, very low when you consider the rate was up to 18.1% in 2007.

What Were the Main Reasons Mortgage Applications Were Rejected?

Credit history and debt-to-income ratios were the two biggest reasons that mortgage applications were rejected. Each accounted for roughly 26% of all denied applications.

In some areas of the country, these two reasons accounted for an even higher percentage of unsuccessful applications. In three California metros  Los Angeles, San Jose and San Francisco, 33% or more applicants were turned down due to debt-to-income ratio. On the other hand, 34% or more applicants were turned down do to credit history in Louisville, Ky.; Memphis, Tenn., and Philadelphia, Pa.

The lack of sufficient collateral accounted for another 17% of rejected applications. For example, a home might not have come in at the expected appraisal value. This accounted for a higher percentage of mortgage loan denials in metros like Detroit, Mich., Hartford Conn., and Milwaukee, Wis.
Incomplete applications accounted for another 14% of application rejections, while a variety of other reasons accounted for less than 10%. Among these other reasons were insufficient cash for down payments, insufficient employment history, mortgage insurance denials, and unverifiable information on applications.

Cities Where You’re Most and Least Likely to Be Turned Down When Applying for a Mortgage

The cities where borrowers were least likely to be turned down for a mortgage were:

  1. Minneapolis, Minn.
  2. Salt Lake City, Utah
  3. San Jose, Calif.
  4. Milwaukee, Wis.
  5. Cincinnati, Ohio

The cities with the highest mortgage application denial rates were:

  1. Birmingham, Ala.
  2. New Orleans, La.
  3. Memphis, Tenn.
  4. Oklahoma City, Okla.
  5. Miami, Fla.

If You’re Applying for a Mortgage, Consider Lakeside for Title Services

When you are buying a home, it’s your right to choose the company you want to handle your title services. When you select Lakeside Title, you’ll work with a  title agency offering cutting-edge tools to streamline your closing so it takes place on time. If you’re a home buyer, lender or real estate agent who would like more information, please contact us today!