Why Are Refinancing Applications Being Denied?

According to a recent MReport, while an increase in interest reduces the amount of qualified candidates, rates are 30 basis points lower than they were a year ago. This indicates that many American homeowners can still save money on their monthly mortgage payments by refinancing. LendingTree analyzed the data of 2.8 million mortgage refinance applications in the 50 largest metropolitan areas. The report revealed that roughly 83% of these applications were approved. LendingTree analysts determined the top four reasons that an application was not approved. Of the 17% of applicants that were denied, 26% were denied due to a too-high DTI (debt-to-income) ratio. Having little or no credit history caused about 23% of applicants to be denied. About 18% were denied because of incomplete credit applications. Finally, 14% were denied due to insufficient collateral. LendingTree emphasized that DTI can be a major barrier in expensive areas, such as New York. In addition, analysts noted that lack of credit was more common in southern metros, such as Birmingham. Applicants in Sacramento, Phoenix, and Riverside, were likely denied due to an incomplete credit application.

WHAT ELSE DID ANALYSTS REVEAL?

Tendayi Kapfidze, LendingTree VP and Chief Economist, advises applicants to, “make sure everything in your refinance application—from your tax records to your employment history—is both complete and accurate and that you have paperwork to back up what you wrote down. Be proactive and gather all of the documentation you’ll need for a refi application so your loan approval isn’t derailed.” Kapfidze also commented that areas with low home prices struggled the most with collateral. Out of the 50 cities analyzed, applicants in Salt Lake City, Portland, and St. Louis were the most likely to be approved. Those in Miami, San Antonio, and Houston were the least likely to be approved.

Click here to read the full MReport and learn more!

Click here to read the full LendingTree report and learn more!