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What to do next if your mortgage application is declined

“Always pick your yard based on your Summer lifetstyle.”

~ KARL

August 30, 2018 - Karl Yeh

Applying for a mortgage or trying to get pre-approved? Worried about getting declined? In this episode, we discuss what to do next if your mortgage application is denied and the importance of a second opinion. We also explore if you should try to get approved by another lender as well as how many times you should apply. Finally, we look at recommended time limits to re-applying for a mortgage. 

   

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Transcription:

Hi everyone. Welcome to another Homebuyer's School video, a channel where you get the latest strategies, tactics and tips from home buying experts. And remember, if this is your first time on this channel and you want to get the latest strategies from the experts, hit the subscription button below. Hit the little notification bell so you don't miss anything.

So today I'm joined by Mujtaba Syed, Manager, Mobile [00:00:30] Mortgage Specialist with TD Canada Trust. And the question we're gonna answer today is:

What happens if my mortgage application is denied?

Mujtaba Syed:             

Yeah, if your mortgage application is denied it's definitely an unfortunate thing. You definitely want to have a conversation, sit down with your lender and find out why was it denied.

That's probably the best thing to do.

And find out was it because of a credit scenario. Was it like the fact that your ratios weren't in line with an income scenario or was the fact the lender wasn't comfortable using a certain point of your income.

It could [00:01:00] be a numerous different things about why you were denied. So first and foremost you want to find out why you were denied.

And if the reasons does not make sense to you definitely ask them to say, "Listen, I don't think this makes sense," or, "I don't think the information that I provided you got really across to you the underwriter, or the people that are looking at your file."

And see, "Well, I would like to maybe send in an appeal, sending it for a second review to see can someone else take a look at it."

At the end of the day underwriting process is definitely something [00:01:30] is done by people so there could be some human error involved. You want to make sure that your file, exactly how you presented it or your lender presented it is a way it was seen across by the underwriter.

And even after that if something does not make sense to you definitely reach out to someone.

Reach out to another professional or someone that comes highly recommended to yourself and get a second opinion. Get a second review done. And ask them, "Does this sound right to you?"

And based on your experience, maybe a lender that you were dealing with or the specialist you were dealing with [00:02:00] was maybe new to their role, did not understand which policy to apply to your certain scenario.

You definitely want to be able to see and say, "Does this make sense? Can I reapply again? What is your recommendation to me?" And if that specialist feels like that they've seen your scenario before 'cause nowadays nothing's cookie cut anymore, right.

Nothing's black and white.

A lot of lending can really be done a lot in the gray area today. So a lot of specialists will really have to actually hone their skills to get a lot better. [00:02:30]

So if your specialist, if you feel like their kind of not, you don't feel comfortable, you feel like it doesn't make sense to you what they've really spoken to you about definitely reach out to someone else.

How to finance your home

Get a second review, get a second opinion done.

Now even after the second review and the second opinion and it still comes back declined, now you know there's a legitimate issue there.

So you should sit down with your lender and specialist and say, "Listen, what can I do to kind of improve my chances. I want to buy. I do want to buy in the future. I don't want to maybe at home forever [00:03:00] or rent forever. What is it that I can do."

They can sit down with you. Make a plan.

If it's a credit scenario they can help you fix your credit, make it better, get you on a payment plan, etc etera, so your credit improves in the future.

If there's an income situation where you feel like your ratios are in line, maybe they that explain that to you. You could maybe look at getting a higher paying job. Maybe you can start working some overtime. Maybe you can look for even a part time job.

A lot of scenarios, a lot of clients are looking at part time jobs and they're working part [00:03:30] time and they're using that for the qualifications. There's lots of ways to qualify for a mortgage if it's just income reasonability.

For example, now most lenders and most insurance companies like CMHC or Genworth will let us use a house if you're buying if it has as legal basement suite, we can sometimes use the rent to actually part of your qualifications to see if you can qualify.

We can put someone in the basement as the rent as we call as a mortgage helper to see if [00:04:00] it will help you qualify for that mortgage.

So there's tons of ways to look at.

Maybe a co-signers a good option, but those are the discussions you definitely want to have with your lender.

But the biggest thing I would recommend is to see what kind of trust and faith you have in your specialist and lender. If something does not make sense to you definitely reach out to someone else, and without wasting too much time.

Because then the process could just drag on longer and longer. Get that second review done and then kind of go from there.

But if you're not qualified or if you got turned down for a mortgage that's not forever, right.

There's always ways to get back and work hard and reapply. And it just depends on what your lender and specialist is going to advise to you.

It could be three months, it could be six months, it could be another year. It really just depends. But I wouldn't give up just because you were turned down once for your mortgage.

Karl Yeh:                      

Now remember if you want to more about the mortgage stress test and qualifications watch our video above [00:05:00].

So let's say you get denied for one lender. I'm sure you can go to different lenders and just keep trying to get approved right?

There's nothing stopping you from doing that?

Mujtaba Syed:             

There is nothing stopping you from doing that but it's also not advisable, right.

Every time you, let's say you go with your first lender and you're turned down. You go to a second lender and then you're turned down. Now you go to a third lender and you're turned down. Now we see a pattern.

We see a pattern and also the credit bureau's gonna be impacted now. We're going to see that you're a credit seeker. And now your going around and just getting turned down from places, which is definitely going to [00:05:30] impact your score.

So what I would do is probably not do more than two, right. Get a second opinion and then from there kind of really decide to see, does this second opinion make sense.

Is it in line with what the first opinion was. If the second opinion is way off and you feel like you have better chance or you get some good news from a second opinion then you know your first opinion was faulty.

But I wouldn't go more than your second opinion. Nothing's stopping you. It's not just advisable.

Most likely if two or three lenders have turned you down there's a really good chance the fourth or fifth or the sixth [00:06:00] going forward are also going to be the same.

As most lenders have very similar lending policies, right. We all kind of base it on risk, and if they feel it's not, if there's not comfort or there's no appetite for that certain amount of risk it's going to be turned down everywhere.

So definitely don't do that. Definitely get a second opinion and maybe kind of decide after the second opinion if you want to go further.

And then just kind of see and to see if what the specialist and lender is telling you about kind of makes sense to you. And if it doesn't make sense then [00:06:30] go for that second opinion. I wouldn't do more than two.

Karl Yeh:                      

Is there a time limit, or do you have a recommended time limit before you should apply again?

Mujtaba Syed:             

Once again, it really just depends on why you were turned down the first time around. If it was a credit issue for something that was unforeseen.

For example there was a collection on your credit or you went over your limit on one of your tradelines. Tradelines are what we call your obligations.

For example like a line of credit can be a tradeline. A credit card can be a tradeline. Let's say you go over your limit on any one [00:07:00] of those products, and you realize it was a mistake and you paid it down.

Yes, definitely, maybe wait three months, four moths. Wait for that credit bureau to update. Wait for that to kind of impact your score into a positive way.

Let's say it impacts your credit, it's gone up. You can try again at that time for sure. But if it's other scenarios. If it's income or something else then it could just depend. It might be longer.

And once again, a great discussion to have with your lender and specialist to see when is a good time to apply, and what [00:07:30] can I do different for having more of a positive outcome next time I apply. So know all those discussions. Have all those discussions and prepare yourself for the next time.

Karl Yeh:                       So the question I have for you is:

Have you ever been denied for a mortgage application and what did you do?

Let us know in the comment section below. Mo do you have anything else to add?

Mujtaba Syed:              No, I think that's pretty much it.

Karl Yeh:                      

Perfect. Well, thank you very much for joining us and remember to watch our mortgage related videos in the description and the playlist below.

Thank you very much for joining us and we'll catch you next time.

Mujtaba Syed:              Thank you.

 

Your turn:

Let us know if you have additional mortgage or financing related questions that we can answer by submitting them in the comments section below. 

Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from home buying experts.  

About Mujtaba Syed:

Mujtaba is an experienced mobile mortgage specialist with a demonstrated history of working in the banking industry. Skilled in Negotiation, Commercial Lending, Banking, Sales, and Credit Analysis. Strong product management professional.

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