Lenders are very approving

Meeting with agent in office, buying renting apartment or house,
fizkes / Shutterstock

Only about 1 in 10 borrowers — 9.8% — is turned down for a mortgage these days, meaning denials are at their lowest level since 2004 and maybe earlier, according to the research from LendingTree.

It's encouraging news, says Tendayi Kapfidze, LendingTree's chief mortgage economist, because being rejected for a home loan can be devastating.

"The key for homebuyers is to be well-educated on the homebuying and mortgage process,” Kapfidze says. “Understanding the key reasons mortgages are denied can help borrowers avoid missteps and compete effectively to secure their dream home."

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Why borrowers are rejected

Confused frustrated young man reading mortgage rejection letter in cafe,
fizkes / Shutterstock

The study found the No. 1 reason mortgage applicants are denied is if their debt-to-income ratio is too high. That is, they already owe a lot of money, and a lender believes their finances probably couldn't handle a mortgage, too.

The second most common source of rejection is not-so-great credit: a weak credit history and lackluster credit score. Be sure to review your credit before you apply for a mortgage, and if your credit score needs improvement, get to work on fixing it.

A less frequent cause for denials is just plain carelessness: borrowers turning in incomplete mortgage applications. You can avoid bungling your paperwork by seeking help from a mortgage broker or other professional.

Your odds are excellent

Good apples, bad apple
Petrica75 / Shutterstock

If your credit is good and you're not already swamped with debt, you should easily find yourself among the majority of borrowers whose mortgage applications are approved.

And this may be the perfect time for you to apply. Rates are the lowest since the autumn of 2016 and have fallen so far within a relatively short time that homeowners can save by refinancing mortgages that are only a year old.

Current average mortgage rates

Loan Type Interest Rate
30-year fixed-rate mortgage 3.69%
15-year fixed-rate mortgage 3.15%
5/1 adjustable-rate mortgage 3.35%

Source: Freddie Mac Primary Mortgage Market Survey, Oct. 17, 2019.

Refinancings have been surging. During the first full week of October, refinance applications were up an astounding 199% compared to the same period in 2018, according to the Mortgage Bankers Association.

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Sorry, Florida Man (and Woman)

Young couple riding bikes in Miami beach, taking selfie pictures
goodluz / Shutterstock

Now, here's the deal with Florida: LendingTree says the cities with the highest mortgage rejection rates are all in the Sunshine State:

  1. Miami (with 11.6% of applications denied)
  2. Orlando (10.9%)
  3. Tampa (9.5%)
  4. Jacksonville (9.5%)

LendingTree says the big problem in all four cities is applicants with too much debt relative to their incomes.

These are the cities where you're least likely to be turned down for a mortgage:

  1. Minneapolis (with only 4.6% of applications denied)
  2. Salt Lake City (4.9%)
  3. Kansas City, Missouri (4.9%)
  4. Virginia Beach, Virginia (5.2%)

Ready to take your shot at a home loan? Start by checking out today's best mortgage rates where you live.

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About the Author

Doug Whiteman

Doug Whiteman

Former Editor-in-Chief

Doug Whiteman was formerly the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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