5 Things to Do if You’ve Been Declined for a Mortgage

For many first-time buyers, getting pre-approved for a mortgage is the first big step toward homeownership. But what happens if your mortgage application gets declined?

It can feel discouraging – but it doesn’t mean your dream of owning a home in Windsor or Essex County is over. A decline is often just a temporary setback and an opportunity to strengthen your financial position. Here are five important steps to take if you’ve been declined for a mortgage…

1) Find Out Why You Were Declined
The first thing you should do is ask your lender for the specific reason your application wasn’t approved. Common reasons include:

• A low credit score
• High debt-to-income ratio
• Insufficient down payment
• Employment or income instability
• Errors on your credit report

Understanding why you were declined helps you create a clear plan to address the issue.

2) Review & Improve Your Credit Score
Your credit score is one of the biggest factors in mortgage approval. If your score is too low, take steps to improve it:

• Pay bills on time every month
• Pay down existing credit card balances and loans
• Avoid taking on new debt or applying for multiple credit cards
• Correct any errors on your credit report

Even a small increase in your credit score can make a big difference in your mortgage options and interest rates

3) Reduce Your Debt
Lenders want to see that you can comfortably handle mortgage payments in addition to your other financial obligations. If your debt-to-income ratio is too high, work on paying down outstanding loans or consolidating high-interest debt. For example, paying off a car loan or credit card balance not only improves your financial standing – it can also help increase the amount you may qualify to borrow when you reapply.

4) Build a Bigger Down Payment
Sometimes a mortgage is declined because your down payment isn’t large enough. Consider these options:

• Open a First Home Savings Account (FHSA) to save tax-free for your down payment
• Use your RRSP through the Home Buyers’ Plan
• Set up automatic savings contributions to grow your funds over time

A larger down payment not only improves your chances of approval but can also reduce your monthly mortgage payments.  

5) Work with a Mortgage Broker & a Trusted Realtor
If one lender says “no,” that doesn’t mean all will. Mortgage brokers can shop around with multiple lenders, including those that specialize in helping first-time buyers or clients with unique financial situations. At the same time, partnering with a trusted real estate professional – like our team at Century 21 Local Home Team Realty, Inc. – can give you guidance on realistic price ranges, budgeting strategies, and programs available to help first-time buyers.

Being declined for a mortgage is not the end of your homeownership journey – it’s a chance to regroup, strengthen your financial position, and come back better prepared. By improving your credit, lowering debt, saving a stronger down payment, and exploring different lending options, you’ll put yourself in a much stronger position for the future.

At Century 21 Local Home Team Realty, Inc., we’re here to help you every step of the way. If you’ve been declined for a mortgage, let’s connect – we’ll work with you to create a plan so you can move forward with confidence and make your dream of owning a home a reality.

Ready to talk about your options? Contact us today for a no-pressure conversation about how to prepare for your next mortgage application.