In 2018, approximately 2.65 million home loans were denied a mortgage loan, which equated to a 24.7% denial rate, per CoreLogic. Many of these borrowers are ideal candidates for private or non-QM mortgage money.
While home improvement loans were denied at the highest rate, rate and term refis and cash out refis also exhibited high denial rates, all over 25%. Meanwhile, home purchase loans were denied 14.6% of the time.
There are a variety of reasons for loan denials. And while credit scores and down payments seem the most obvious causes, it is rather the debt-to-income ratios (DTI’s) that are the most common reason for mortgage declines.
The debt-to-income is a ratio based on your monthly liabilities (bills) divided by your monthly gross income. The lower this number the better, as it means you have more cash available to afford a housing payment.
Several years ago, the Consumer Financial Protection Bureau (CFPB) established a DTI percentage of 43% for loan approvals, with DTIs above that level now facing additional scrutiny.
Overall, a high DTI was the main reason for more than 36.8% of denied home-purchase applications, 34.3% of denied non-cash-out refinances, and 31.9% of denied cash-out refinances in 2018.
Should you be part of that 25% mortgage declines but have strong equity in California real estate and a make sense story, please consider the private money option. You can achieve your financial goals and refinance or sell within 24 months.
At Cushner Capital Group, we understand that the most of us have twists in the road when it comes to financial situations. Sometimes a bank will not approve you despite great intentions and a good track record. Nearly one in four are declined by traditional lenders. Do not let that deter you from realizing your real estate goals. Please call us. The call and the conversation is free. (760) 845-9035.