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PROBABLE CAUSES OF LOAN DENIAL & ITS SOLUTION -II

The other causes of loan denial can be the property value and repayment history of the borrower.

Appraised value of Property less than the agreement price :- If loan amount  requested by borrower is larger than 95 percent of the appraised property value, the loan could be denied because of high LTV or value as coated by the seller is appreciated as compared to market price .In such a case following steps can be adapted by the borrower:

  • The sale price of the property can be lowered by discussing the same with the seller of the property by quoting the appraised value as stated by the lender;
  • Make additional down payment to cover the difference between appraised value and purchase price;
  • If you think the appraiser undervalued the property suggest that the lender re-examine the appraisal.

Bad Repayment History of the Borrower: - Under the rule of Fair Credit Reporting Act, a lender who denies your loan application because of insufficient or bad repayment history on the basis  of information in your credit report.i.e if loan is denied on the basis of poor credit then as a borrower you can ask the lender to provide you a free copy of credit report.


You have the right to dispute the accuracy or completeness of any information in your credit report. The credit bureau must correct the errors in the report. If there are unsettled disputes over certain accounts, you can include your side of the argument in the report. If there were special circumstances (decease, etc.) surrounding old credit problems, ask for a chance to explain the same.

In some cases, House of Urban Development insures loans for people who have had credit trouble and do not meet standard credit requirements. If the credit report is accurate and you have a poor credit history, you need to start repaying outstanding balances on time in order to re-establish an acceptable record and then try to apply for a loan again.

If you are still unable to get credit, you can try getting a loan with other lenders because lenders may have a slightly different qualifying standard or you may wish to ask a friend or relative with an established credit history to act as a co-signer for you. A co-signer promises to repay the debt if you don't pay or unable to pay. Thus, by knowing the possible reasons of loan denial and acting promptly and quickly, a loan denial could be converted into a loan approval.

 

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