Don't be surprised if your friendly lender, the one who invites you to sit down and apply for a mortgage, then ushers you politely out the door empty-handed after you've chatted a bit.
The sudden chill isn't personal. The Mortgage Bankers Association, or MBA, in Washington, D.C., estimates that about half of all mortgage applicants are now being turned down.
"Our latest survey covered the first half of 2008," says MBA spokeswoman Carolyn Kemp. Then, the acceptance rate for purchase applications was 55 percent, and 65 percent for refinance requests. Since then, further tightening of credit standards means at least half of mortgage-seeking consumers can't squeeze through to acceptance, Kemp says.
Instead of yielding to shame, anger or any of the usual emotions associated with rejection, today's consumers who are intent on buying or refinancing should adopt a pragmatic stance since clear-eyed determination may eventually land them a loan.
Get a read on the reason
If you've submitted a formal application, federal law dictates that you're entitled to a formal rejection.
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Expect an "adverse action" notice, spelling out the reasons for turning you down, which these days is likely to state that the loan amount you're seeking is too large compared to the current appraised value of your home, says Joe Thiesen, president of the Wisconsin Mortgage Professionals Association and branch manager of Fairway Independent Mortgage Corp. in Madison, Wis.
If it's not your home's value that's the issue, it may be your personal credentials, such as your credit worthiness, work history, or debt load.
When credit is the issue, an adverse-action notice is required, naming the credit reporting agency that provided the data on which the lender based its decision, according to Federal Trade Commission rules. You're also entitled to a free credit report; see the FTC Web site for more information.