SOURCE: Carrington Mortgage Services, LLC

Carrington Mortgage Services, LLC

December 23, 2013 06:00 ET

"My Mortgage Application Was Denied... Now What?"

SANTA ANA, CA--(Marketwired - Dec 23, 2013) - Mortgage applications sometimes get declined, rejected, or denied. If this happens to you, don't panic! Mortgage financing may still be available. In fact, you may be able to obtain a new loan with surprising speed.

"Different lenders have different standards," said Ray Brousseau, executive vice president with Carrington Mortgage Services, LLC, a lender active in more than 40 states. "Where one lender looks at a loan file and sees a red flag, we might see green. For this reason, it's important not to take a loan rejection personally or consider it a black mark. Just re-group and speak with a replacement lender who can get the job done."

Brousseau pointed out that for example, in some cases, Carrington may have loan programs available that accept lower credit scores. As well, Carrington has access to a wide variety of potentially accessible government loan programs that might not be offered by some of the larger lending institutions.

Brousseau also explained that a second loan application may be a lot easier and quicker than the first.

"When you submitted your first loan application, it took some time to pull together the necessary documents and forms," noted Brousseau. "Now, you have those materials in hand, and you have a current and usable appraisal that a replacement lender can consider. The result is that you may be able to breeze through the underwriting process with a second lender a lot faster and with a lot less hassle than the first."

Why would one lender deny a loan application, while a second lender would say yes?

Changing Requirements

Every loan product comes with a list of requirements. To meet marketplace standards, the lender must assure that all requirements are met, and generally this means finding and documenting such things as income, employment, debts, credit and property value.

"Loan requirements change all the time," said Brousseau. "This happens because investors enter and leave the mortgage marketplace on a constant basis, so there are always new programs with new guidelines to consider. The result is that a borrower who does not qualify one day may well qualify the next."

Quick Turnaround

It used to be fairly common for loans to require 45 days and even longer for settlement. No longer is that the norm.

"In many cases, we can close a loan in 21 days," stated Brousseau. "This means that if a borrower started with one lender and now needs a quick approval, we may be able to help. While other lenders have been downsizing, we've been adding staff as part of our effort to better serve borrowers."

FHA Mortgages

As an example of changing loan standards, consider FHA financing. HUD has generally required after a foreclosure or short-sale that borrowers must wait at least three years to apply for a new FHA loan. However, HUD changed the rules in August under its "Back to Work -- Extenuating Circumstance" program. Now, borrowers who encountered financial hardship because of the recession can apply for new financing in as little as 12 months.

"Why should people with basically good credit be hurt because their employer closed or they went through a few months of tough times?" said Brousseau. "The new FHA policy opens up the lending system to huge numbers of people who ran into financial problems and have now re-built their credit."

Credit Scores

When you apply for a mortgage these days you automatically get a credit score from your lender. The reason is that lenders must supply such information when setting the "material terms of credit" or if they decline a loan. For borrowers who go to a replacement lender the result is that both the first and second lender will each supply a credit score.

Undisclosed Debt -- Borrower Beware

"When a loan is declined, it's extremely important for borrowers to create a financial 'quiet period,' a time in which they do not make major purchases, increase credit balances or open new credit accounts," explained Brousseau. "Financial quiet periods can help borrowers avoid sliding over debt limits during the application process."

Portable Appraisals

In many cases, appraisals can be seen as "portable," meaning they can be transferred from one lender to another.

"Portable appraisals can be a big benefit for borrowers, especially those who have been declined for a mortgage," said Carrington's Brousseau. "Instead of the cost and hassle of a second valuation, the borrower asks the first lender to send the appraisal to the replacement lender. If the appraisal meets all requirements, which it should, then the loan application can move ahead with greater speed than would otherwise be the case."

Finding the Right Loan Program

The standards for one loan program may be slightly different -- or very different -- from another. Not all lenders have access to the same programs. This means lenders have to connect the right loan program with the right borrower. It also means that borrowers must find the lender with the programs that best match their needs and situations. If it doesn't work out the first time, there is every reason to try again.

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