Nearly one out of every ten mortgage applicants gets denied, according to a new study by online loan marketplace LendingTree. Nothing is worse when your dream of homeownership is on the line than getting turned down for the financing you need.

It can be a sign that you’re either financially underprepared for homeownership or you could be simply a casualty of a housing market that has very low inventory, high demand, and increasing home values seemingly at every turn. At a time like this, you’re not just trying to woo banks to lend to you, but you’re also competing with other homebuyers to win bids on homes.

“The key for homebuyers is being well-educated on the homebuying process, enabling them to be well-prepared when they enter the market,” says LendingTree Chief Mortgage Economist Tendayi Kapfidze, who led the study. “Understanding the key reasons mortgages are denied can help borrowers avoid missteps and compete effectively to secure their dream home.”

In this analysis, LendingTree, which is the parent company of MagnifyMoney, analyzed more than 10 million mortgage applications using the most recent available Home Mortgage Disclosure Act data set.

With the analysis, they were able to home in on the top reasons people get denied:

  1. Credit history (which includes credit score) and debt-to-income ratio (your total monthly debt obligations vs. your monthly income) were each attributable to 26 of denied mortgage application
  2. Collateral, which includes the home appraisal, was behind 17% of denials.
  3. Incomplete applications caused 14% of denials.

The 3 toughest cities to get approved for a mortgage:

Birmingham, Ala.

  • Denial rate: 13%
  • Leading cause of denials: Credit history

New Orleans

  • Denial rate: 12%
  • Leading cause of denials: Credit history and debt-to-income ratio

Memphis, Tenn.

  • Denial rate:12%
  • Leading cause of denials: Credit history

The metros where borrowers are LEAST likely to get denied for a mortgage:

San Jose, Calif.

  • Denial rate: 5%
  • Leading cause of denials: Debt-to-income ratio

Salt Lake City

  • Denial rate:5%
  • Leading cause of denials: Credit history and debt-to-income ratio

Minneapolis - St. Paul, Minn., Wis.

  • Denial rate: 5%
  • Leading cause of denials: Credit history and debt-to-income ratio

Tips to get your mortgage application approved:

Credit history: Review your credit report and ensure it is accurate. Clean it up and dispute errors before you apply for a mortgage.

Debt: Pay down debt aggressively. Avoid taking on new debt in the year before you apply for a mortgage.

Collateral: In a competitive market, some buyers are bidding on homes without getting an appraisal. You can do this, but if the lender’s appraisal comes in lower than your price, you’re either going to get denied for the amount you want or you’re going to have to make up the difference in cash.

Documents on deck: You’ll need W-2s, bank statements, tax records, a record of your employment history and more once you apply. Get everything lined up in advance.


MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.