Mortgage Denial Rates: What HMDA Data Reveals
How denial rates vary by loan type, income level, and property type, based on 12.2 million mortgage applications in the 2024 HMDA dataset.
Source: CFPB HMDA 2024 · 4,908 lenders · 8 min read CFPB HMDA 2024 · 4,908 lenders · 8 min read
Compiled by the " research team.
Key Takeaway
Mortgage denial rates in HMDA data range from 6% for VA purchase loans to over 15% for cash-out refinances. The primary denial reason across all loan types is debt-to-income ratio, not credit history, as many borrowers assume. HMDA data shows outcomes, not causes; the dataset does not include credit scores, which explain most of the variation between borrower groups. Use the data to compare lenders, not to draw conclusions about individual fairness.
The HMDA Dataset: What It Captures
The Home Mortgage Disclosure Act (HMDA) requires most mortgage lenders to report every loan application they receive. The 2024 dataset includes 12.2 million applications from 4,908 reporting lenders, the largest public mortgage dataset in the United States.
For each application, HMDA captures: loan amount, loan type, loan purpose, property location, action taken (originated, denied, withdrawn, etc.), applicant income, and if denied, up to four denial reasons. What HMDA does not capture: credit scores, full debt-to-income ratios for approved loans, property appraisal values, or employment verification details. This limits how far you can go in interpreting denial rate patterns.
Explore lender-level denial rates or state-level lending patterns on PlainLender.
Denial Rates by Loan Type
The most significant variation in denial rates across the HMDA dataset is by loan type, not by any borrower characteristic. Government-backed loan programs designed for broader access show higher denial rates in raw terms partly because they attract borrowers with thinner financial profiles, exactly the group each program was designed to reach.
| Loan Type | Approval Rate | Denial Rate | Withdrawn |
|---|---|---|---|
| Conventional Purchase | 72% | 9% | 19% |
| FHA Purchase | 68% | 14% | 18% |
| VA Purchase | 81% | 6% | 13% |
| USDA Purchase | 74% | 10% | 16% |
| Conventional Refinance | 61% | 12% | 27% |
| Cash-Out Refinance | 58% | 15% | 27% |
Rates are approximate based on 2024 HMDA data. Percentages do not sum to 100% because other outcomes (approved but not accepted, file closed for incompleteness) are not shown. Source: CFPB HMDA 2024.
Compiled by the " research team.
Denial Rates by Income Level
Income level is among the most predictive factors for mortgage denial outcomes in HMDA data. This reflects the direct relationship between income and debt-to-income ratio, the number-one denial reason across all loan types. It also reflects that lower-income applicants are more likely to be first-time buyers with shorter credit histories and smaller down payments.
| Income Bracket | Denial Rate Range | Top Denial Reason |
|---|---|---|
| Below $40K | 16%–20% | Debt-to-income ratio |
| $40K–$75K | 10%–14% | DTI + credit history |
| $75K–$120K | 8%–11% | Credit history |
| $120K–$200K | 6%–8% | Collateral / property |
| Above $200K | 4%–6% | Collateral / documentation |
Income brackets are approximate. Denial rate ranges reflect variation across different lenders and markets within each bracket. Source: CFPB HMDA 2024.
Compiled by the " research team.
What Denial Reasons Tell You
When HMDA data shows a lender denying applications, it also records the reason. Across all lenders and loan types in 2024, the distribution of denial reasons is roughly:
- Debt-to-income ratio: The most common single denial reason, cited in approximately 30–35% of denials. This directly reflects the gap between housing costs and income.
- Credit history: The second most common reason (approximately 20–25%), covering low credit scores, derogatory marks, thin files, and bankruptcy history.
- Collateral: Cited in 10–15% of denials, meaning the property did not appraise high enough to support the requested loan amount.
- Insufficient cash: Cited in 8–12% of denials, reflecting inadequate down payment or reserves.
- Employment history: Less common but significant for self-employed borrowers and those with recent job changes.
Knowing which denial reason is most common at a specific lender, visible in each lender's profile on PlainLender - helps you choose lenders whose underwriting focus aligns with your financial profile.
Property Type and Geographic Variation
Denial rates also vary by property type. Single-family homes (detached, 1-unit) have the lowest denial rates because they are the most straightforward collateral to appraise and the most liquid if the lender needs to foreclose. Condominiums and multi-unit properties face higher denial rates due to:
- Condo approval requirements: Fannie Mae and Freddie Mac require a condo project to be "warrantable" - meaning the HOA is financially solvent, owner-occupancy rates exceed a threshold, and certain restrictions don't apply. Non-warrantable condos require portfolio lenders and often carry higher rates.
- Multi-unit complexity: 2–4 unit properties typically require larger down payments (20–25%) and have stricter underwriting than single-family homes.
- Investment properties: Loans for non-owner-occupied properties face significantly higher denial rates and require 15–25% down with stricter reserves.
Geographic variation is also substantial. Metro-level data on PlainLender shows how lending volume and approval rates differ across markets, high-cost metros often show higher denial rates as loan amounts approach and exceed conforming limits.
Interpreting Denial Rate Data Responsibly
HMDA denial rates are useful for identifying lender patterns and market trends. They should not be used to:
- Draw conclusions about individual loan decisions without knowing the credit profile
- Allege discrimination without conducting a proper matched-pair or regression analysis controlling for underwriting factors
- Compare lenders operating in different markets without adjusting for loan mix and borrower profile differences
Regulatory agencies (CFPB, HUD, DOJ, OCC) use HMDA data as an initial screening tool to identify lenders warranting a fair lending examination. They then conduct detailed case-file reviews before concluding that any lender has violated the Equal Credit Opportunity Act or Fair Housing Act. The raw HMDA denial rate is a starting point, not a conclusion.
How to Use This Data as a Borrower
The most practical use of HMDA denial rate data for individual borrowers:
- Pre-screen lenders: Avoid lenders with unusually high denial rates in your loan type and geographic area, they may have stricter underwriting than alternatives.
- Understand your risk factors: If your income is at the lower end of qualifying, focus on lenders with strong track records in FHA or USDA programs. If your credit is strong but down payment is modest, look at conventional lenders with competitive PMI pricing.
- Check denial reasons by lender: A lender that primarily denies for DTI issues may not be the right fit if your income-to-loan ratio is tight. A lender that frequently cites credit history as the denial reason may be stricter on credit than others.
- Target high-volume local lenders: Lenders with strong origination volume in your specific market often have established relationships with local appraisers and may be more flexible on property-related issues.
Use PlainLender's lender directory to filter by state and loan type, then review individual lender profiles before deciding where to apply.
Frequently Asked Questions
What does HMDA data show about mortgage denial rates overall?
HMDA 2024 data covering 12.2 million applications shows an overall denial rate of approximately 9% for conventional purchase loans. However, denial rates vary substantially by loan type, income level, property type, and geographic market. The data is useful for identifying patterns at the aggregate level, but cannot establish the cause of any individual denial, credit scores and other key underwriting factors are not part of the public dataset.
Why are denial rates higher for lower-income applicants?
Lower-income applicants face more denials primarily because of debt-to-income ratio (DTI) constraints and insufficient cash reserves. Lenders typically require monthly mortgage payments to be under 28% of gross income, with total debt under 43%. When housing costs represent a high share of income, borrowers are more likely to exceed these thresholds. Down payment is also a challenge: a smaller down payment means a larger loan relative to income, raising DTI. These are objective underwriting factors rather than discriminatory ones.
What are the most common mortgage denial reasons in HMDA data?
HMDA data shows lenders must report up to four denial reasons. Across 2024 data, the top reasons are: debt-to-income ratio (the most common), credit history, collateral (property value concerns), and insufficient cash. Employment instability and incomplete applications are less common but still appear regularly. Understanding which denial reason is most prevalent at a specific lender can help borrowers decide whether to apply there or choose a lender with a different underwriting focus.
Are denial rate differences between income groups evidence of discrimination?
Not necessarily. HMDA data does not include credit scores, property appraisals, detailed DTI ratios, or employment history, the primary factors in underwriting decisions. Research consistently shows that when researchers statistically control for credit scores and DTI, denial rate gaps narrow substantially. Some economists estimate that credit score differences explain the majority of the observed variation in denial rates by income level. HMDA is a screening tool for fair lending examinations, not a definitive measure of discrimination. Regulators investigate further when HMDA patterns warrant it.
How do denial rates vary by loan type?
Conventional loans have lower average denial rates than FHA loans in raw terms, but this is partly because FHA borrowers typically have lower credit scores and less assets, exactly the profile FHA was designed to serve. VA loans have the lowest denial rates of any government-backed program, reflecting that VA borrowers often have stable employment (military or veteran) and benefit from no down payment requirement. USDA loans serve rural borrowers and have moderate denial rates with strict income and geography eligibility requirements.
Can I look up denial rates for a specific lender?
Yes. PlainLender's lender database shows approval rates, denial rates, and top denial reasons for each of the 4,908 lenders in the 2024 HMDA dataset. You can see whether a particular lender denies applications at higher rates than average, and which denial reasons dominate at that institution. This is useful when choosing which lenders to apply to, a lender with a high rate of DTI-related denials may be stricter on income ratios than others.
Related Data
Sources
- Consumer Financial Protection Bureau, Home Mortgage Disclosure Act (HMDA) Data, 2024
- Federal Financial Institutions Examination Council (FFIEC) - HMDA Filing Instructions Guide
- Urban Institute - "HMDA Data and Fair Lending Analysis"
- U.S. Department of Housing and Urban Development, Fair Housing Act guidelines
- Equal Credit Opportunity Act, 15 U.S.C. § 1691
This content is for informational purposes only. Denial rate data reflects aggregate patterns from federal HMDA reporting and cannot be used to determine the legality of any individual lending decision. If you believe you have been unlawfully discriminated against in a mortgage transaction, contact the CFPB or HUD.
