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Nothing is more devastating to homebuyers than to search for months and finally find the place they want, only to be rejected by their chosen lender. But it happens. Roughly 1 in 10 loan applicants are turned down, according to the latest statistics.

If you are one of those unfortunate few, don’t curl up into a ball or feel sorry for yourself. Instead, try, try again.

You can always take your business to another lender, one that may have different underwriting standards. But before you do that, figure out why you were denied and try to fix it.

There are numerous reasons would-be borrowers are told no. Maybe your credit score is too low. Perhaps the lender balks at the condition of the property you want to buy. Maybe the appraisal is too low, or the lender doesn’t like a condition in the sales contract that you agreed to. It could be any of those things – or a combination of several.

Lender Required to Explain Rejection

The lender is required by law to give you a letter of adverse action explaining why you were rejected. While these letters are supposed to state the lender’s specific reasons, most are fairly vague. But they should at least include contact information for someone who can explain things further.

If the reason has to do with the appraisal, you can ask for a second opinion or rework the contract to satisfy the lender. If a contract clause puts the lender off, you can rework that with the seller, too.

If rejection is based on your credit report, the lender is required to provide the name and address of the creditor and the credit bureau that provided your credit score. Then, it is up to you address the issue directly with those parties. (Truthfully, this should have been done before you ever applied for financing – even before you started hunting for a house.)

To determine what the lender finds objectionable, ask for a copy of your credit report. Credit agencies are required by law to provide a complete copy of your file. It must be up-to-date and free of old, sealed or expunged information that has been legally excluded from public access, so start by making sure nothing of that nature has found its way into your files.

Next, look for errors: accounts that don’t belong to you, for example, or paid-off credit cards that are marked as active and past due. Credit reports are often riddled with bad information, and if you don’t take corrective measures, an error-pocked credit record could affect not only your ability to buy a home, but also to rent one.

Once you know what needs to be corrected, don’t just call the credit agency. Sit down and write a letter, listing what is wrong in your report and asking that it be fixed. Give the agency 30 days or so to make the changes, and ask for a written response. If you call instead of writing, keep track of every conversation, including the name and ID number of the person you spoke with, the date and time of the call, and your recollection of what was said.

If you have to contact the agency a second time, use stronger words and state your intention to complain to the Consumer Financial Protection Bureau, the Federal Trade Commission and anyone else who will listen. And if you still get nowhere, follow through on your threats.

You also can take your records to the lender to explain why your score should be higher. If they deem your evidence valid, they may reconsider your application. (That doesn’t mean they’ll necessarily approve it, of course, but at least they’ll give it another look-see.)

Tips to Build Credit

But what if your credit report is accurate, and your score is simply too low for the lender’s liking? In that case, you’ll really have to get to work.

Find an expert in credit scoring to advise you on what steps to take to raise your number. Maybe you’ll have to bring down your credit usage – 30 percent or less of your total credit line is considered ideal – or pay off judgments against you that you’ve ignored.

Scoring algorithms are often counterintuitive: For example, paying off an old debt might seem like a good step, but because the software sees the payoff as a new transaction, it may actually lower your score instead of raising it. So, a little expert assistance can go a long way.

You might start by asking your lender for recommendations. You could also search for a mortgage broker – an independent, insurance agent-like broker who writes loans for different lenders, and therefore understands the credit scoring process. Or you can seek guidance from a government-approved housing counselor.

Lew Sichelman

Another option: Look online for a “what if” credit simulator that lets you play out financial scenarios and see how various choices might affect your score. According to Experian, one of the three main credit repositories, such simulators can give you a general sense of whether a single action will have a positive or negative impact, and they can estimate with reasonable accuracy the amount by which a given action will change your score.

However, simulators can’t account for multiple credit-impacting events occurring in a single month, Experian said. Consequently, a simulated score should be taken as general guidance, not dictum.

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at