Almost one-in-four home purchase applicants is denied, according to mortgage software company Ellie Mae.
Even more homeowners are turned down when it comes to refinance applications -- more than 30 percent.
Not all lenders are created equal, though. Some banks, credit unions, and mortgage brokers do things that others canâ€™t.
Many times, it's all about finding a knowledgeable lenderÂ that thinks outside of the box.
Donâ€™t lose hope just because you have been turned down in the past.
Following are true stories of successful home buyers who got mortgage-approved despite being told â€śnoâ€ť the first time.Click to see today's rates (Jul 21st, 2017)
Until recently, Timothy and his wife Brenda, along with their three children, had been life-long renters.
They did not rent simply because they enjoyed renting. They rented because Brenda was a stay-at-home mom, and with just one income.
Their budget didnâ€™t extend far enough to cover their monthly bills.
As a result, there were times where they were forced to live off of their credit cards. A couple of late payments and a few maxed out credit cards took a toll on their credit scores.
Timâ€™s credit score was 577. His bank turned him down due to his less-than-perfect FICO.
Fortunately, thanks to a lenderâ€™s credit analyzer program, Tim was able to get a detailed game plan on how to get his credit scores up.
Eager to become homeowners, Tim and Brenda followed the instructions to the â€śTâ€ť. All they had to do was pay down a couple of credit cards, and transfer a balance from one card to another. The cost to do this: just under $500.
With the help of a rapid rescore, they saw immediate results. In less than one week, Tim saw his credit score jump almost 50 points!
With Timâ€™s credit score now at 625, Tim and Brenda went home shopping that very weekend. They found their dream home, made an offer, and moved into their new home just 30 days later.Click to see today's rates (Jul 21st, 2017)
Jennifer is starting college in the fall. It is both an exciting and anxious time for her as this will be her first time living on her own, away from home.
She applied for a mortgage but was told she didnâ€™t qualify due to her lack of income and employment. Unfortunately, her part-time income from her new job wasnâ€™t enough to get her approved for a home loan.
Jennifer and her parents met with a lender to discuss some options. Initially, her parents were considering co-signing for their daughter.
However, after exploring some of the parentâ€™s long-term financial goals, another option surfaced.
Jenniferâ€™s parents had always wanted to invest in real estate. However, they were apprehensive about being landlords.
The parents were also unsure as to how much they would need for a down payment, assuming 20-25% would be required. They had some money in savings, but they didnâ€™t want to empty their nest egg.
A 25 percent down payment just wasnâ€™t feasible. 20 percent was possible but it would deplete their savings.
Fortunately, after meeting with their lender, Jenniferâ€™s parents were pleasantly surprised to learn that only 15% was needed for down payment.
Jennifer not only gets to live in a new home as she starts college, but her parents are venturing into real estate investing, on their terms and at their pace.
FHA loans are great, especially for buyers like Daniel, who bought his first home five years ago.
Daniel was initially turned down when he applied for a conventional loan.
Not only did he have less-than-perfect credit, he had limited funds for down payment. With FHAâ€™s relaxed credit guidelines, as well as the small down payment requirement of just 3.5 percent, an FHA loan was perfect at the time.
Now, five years later, thanks to a thriving real estate economy, Danielâ€™s home has appreciated significantly.
According to CoreLogic, U.S. home pricesÂ have appreciated about 6 percentÂ over the past few years.
Daniel used his home equity to cancel FHA mortgage insurance.
He refinanced out of his FHA mortgage and into a conventional loan. Now that he had better credit scores -- a byproduct of owning a home and making on-time payments -- he also dropped his interest rate by 0.25%.
Thanks to a lower rate and no mortgage insurance, the refinance saved Daniel $235 per month.
Danielâ€™s plan is to take that $235 savings and apply it right back towards the principal of his new loan.
In doing so, Daniel will be able to pay off his 30-year loan in just 21 years.
Some homeowners in Danielâ€™s situation may be reluctant to refinance back out to a 30-year term for fear that they are throwing away those five years of payments that were already made.
However, using Danielâ€™s example, instead of going backwards, Daniel is actually cutting four years off of his term. Not to mention the increased tax benefits now that Daniel is back to paying more interest now that his new loan is re-amortized.
Being denied by one lender doesnâ€™t mean youâ€™ll be denied by every lender. There may be a number of loan programs available that may fit your situation. You just donâ€™t know about them yet.
Donâ€™t give up just because youâ€™ve been turned down.Â Try, try again.Click to see today's rates (Jul 21st, 2017)
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)