Why Mortgage Applications Get Denied

The Top Denial Reasons

HMDA requires lenders to report the specific reason(s) for denying a mortgage application. The most common reasons, in order:

1. Debt-to-income ratio (DTI): HMDA records this code when the reporter cites total monthly debt payments, including the proposed mortgage, as exceeding its threshold. Public materials often describe that threshold as roughly 43-50% of gross income; HMDA itself does not publish the cutoff used on each file.
2. Credit history: Your credit score is too low, your credit history is too short, or you have recent derogatory marks (late payments, collections, bankruptcy). Most conventional loans require 620+. FHA accepts 580+.
3. Collateral: The property appraisal came in below the purchase price, the property has structural issues, or it doesn't meet the loan program's requirements (FHA has specific property standards).
4. Insufficient cash: You don't have enough for the down payment, closing costs, and required reserves. Different loan types have different minimums (3% for conventional, 3.5% for FHA, 0% for VA/USDA).
5. Employment history: Inconsistent income, recent job changes, or self-employment without sufficient documentation. Lenders typically want 2 years of stable employment history.
6. Incomplete application: Missing documentation. This is a procedural denial, not a creditworthiness issue.

Browse any lender's page on PlainLender to see their specific denial reason breakdown.

How Denial Rates Vary

Not all lenders are equally likely to deny your application. HMDA data reveals significant variation:

• By lender: Some lenders deny 5-10% of applications. Others deny 30%+. Lower denial rates may indicate more flexible underwriting or better pre-screening.
• By loan type: FHA loans have lower denial rates than conventional loans because they're designed for borrowers with weaker profiles.
• By geography: Denial rates are higher in areas with volatile real estate markets (where appraisal issues are more common) and in areas with lower average incomes.
• By purpose: Refinance applications tend to have lower denial rates than purchase applications because the borrower already owns the property and has an established payment history.

Compare lender rankings to inspect as-reported approval records by market; rankings are descriptive HMDA aggregates, not recommendations.

What HMDA denial patterns describe

Published denial fields show how often lenders cite each HMDA reason. They describe reported outcomes across applications; they are not a personal underwriting checklist:

1. Debt-to-income is the most common national denial reason in HMDA. Conventional and FHA thresholds differ in published GSE/CFPB program materials.
2. Credit history covers score, thin file, and recent derogatory events as lenders report them, not a PlainLender credit prescription.
3. Collateral and cash denials track appraisal and reserves outcomes on the filed application.
4. Cross-lender variance is visible in HMDA: the same market shows different denial rates by institution. The CFPB publishes shopping and Loan Estimate comparison guidance separately from this registry.
5. Government programs (FHA, VA, USDA) appear as loan-type filters on lender and metro pages so researchers can keep product mix constant.

Compare lender rankings and profiles for as-reported approval and denial fields in a chosen market.

Frequently Asked Questions