Where People Are Most, Least Likely to Be Denied a Mortgage

October 9, 2019

Mortgage denials have fallen to the lowest rate since the financial crisis and dating back to 2004, according to data from the Home Mortgage Disclosure Act. Still, that doesn’t mean all borrowers on the path to homeownership will qualify for financing. Nearly one in 10 borrowers get denied for a mortgage, according to a new analysis from LendingTree.

LendingTree researchers analyzed more than 10 million applications available through the Home Mortgage Disclosure Act to see where and why mortgage shoppers are getting denied.

“Most reasons for denial are financial, but some are not borrower-specific, such as concerns about the collateral,” says Tendayi Kapfidze, a LendingTree chief mortgage economist, who led the study. “The low denial rate is encouraging, though some of this is because the financial profile of mortgage applicants has improved. The key for homebuyers is to be well educated on the homebuying and mortgage process. Understanding the key reasons mortgages are denied can help borrowers avoid missteps and compete effectively to secure their dream home.”

The leading reasons for mortgage denials, researchers found:

  • Debt and credit history: A potential borrower’s debt-to-income ratio at 33% and credit history (which includes credit score) at 23% was the chief reason for denied mortgage loans, LendingTree found.
  • Inspections and appraisals: Another top reason for mortgage denials at 17% centered on collateral.
  • Incomplete applications: About 13% of applicants were denied because their applications were incomplete; 8% had unverifiable information contained within their application.

In some metros, denial rates rose up to 12% of mortgage applications, while in others they were as low as 5%, researchers note. The top metros that had the highest percentage of borrowers receiving a mortgage denial are:

Miami

  • Denial rate: 11.6%
  • Leading cause of denials: The leading cause of rejection in Miami is debt-to-income ratio, which was cited in 32.4% of failed loan applications. Collateral was next at 22.7%.

Orlando, Fla.

  • Denial rate: 10.9%
  • Leading cause of denials: Debt-to-income at 36.5%, then credit history at 18.8%.

Tampa, Fla.

  • Denial rate: 9.5%
  • Leading cause of denials: Debt-to-income at 33.1%, then collateral at 19.1%

On the other hand, the following metros had borrowers who tend to be the least likely to be denied a mortgage:

Minneapolis

  • Denial rate: 4.6%
  • Leading cause of denials: Debt-to-income at 30.7%, then credit history at 21%.

Salt Lake City

  • Denial rate: 4.9%
  • Leading cause of denials: Debt-to-income at 27.7%, then credit history at 18%.

Kansas City, Mo.

  • Denial rate: 4.9%
  • Leading cause of denials: Debt-to-income at 26.7%, then credit history at 21.1%.
 
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