It certainly took some time, but a decade after the housing crisis, most analysts seem to agree that credit availability is slowly heading in the right direction.
But if it seems like a large number of mortgage applications are still being rejected – many from creditworthy borrowers who simply don’t fit traditional guidelines – that’s because they are.
Surprisingly, large numbers of loan applications don’t make it. About one of every nine loan applications (10.8 percent) to purchase a home — and more than one in four applications (26.4 percent) for a refinancing — were denied in 2017, according to a new analysis of lender data nationwide conducted by the federal Bureau of Consumer Financial Protection.
The research included conventional loans and loans insured by the Federal Housing Administration or backed by guarantees from the U.S. Department of Veterans Affairs, the Farm Service Agency, or the Rural Housing Service.
But another report, The Senior Loan Officer Opinion Survey on Bank Lending Practices, showed that the recent easing of credit has still left some borrowers behind:
“Mortgage credit conditions continued to slowly ease, but credit remained more difficult to obtain for individuals with lower credit scores or hard-to-document incomes.”
So what’s keeping these loans from being approved? According to research cited in Forbes some of the biggest reasons why mortgage loans get rejected include:
- 26% because of DTIs
- 26% because of credit score / history
- 17% because of collateral (home did not appraise)
Other common reasons why mortgage loan applications are rejected include:
- Insufficient documentation of income / assets
- Down payment
- Property condition
While conventional loan programs have limited flexibility for self-employed borrowers, or those with credit events and lower DTI ratios, that doesn’t mean originators cannot help these creditworthy borrowers who don’t fit traditional guidelines. In fact, this underserved market represents a massive business opportunity for originators who have the programs, partnerships and support needed to offer responsible non-QM lending.
Verus Mortgage Capital’s own research estimates that nearly $200 billion in annual unmet borrower demand exists. We’re committed to helping our lending partners reach these deserving borrowers with innovative non-QM programs that break through the barriers of conventional lending, including:
- Interest-only options on virtually all programs
- Credit impaired borrowers
- Higher balance loans up to $5 million
- Investor Solutions
- Renovation Loans
- Bridge Loans
- Foreign National
- Non-Warrantable Condo
At VMC, we provide a wide range of programs, many with unique features created in response to the expressed needs of our clients and their borrowers. We are constantly working to add new and improve existing programs to meet the challenges of today’s lending environment.
In addition, we’re proud of our reputation for helping our lending partners close tough deals – we look for reasons to approve loans, not deny them. If you’re looking to learn more about growth opportunities outside the credit box, or expand your current non-QM business, let’s talk today.