Applying for a mortgage? The most common reason buyers get denied

(InvestigateTV) — Eight percent of mortgages were denied in 2024, according to a NerdWallet report, a rate that has remained fairly steady over the past six years.

Kate Wood, a lending expert with NerdWallet, said many of those denials are happening late in the homebuying process, sometimes after buyers believe they are close to the finish line.

One of the most common reasons mortgage applications are denied is a high debt-to-income ratio. Wood said that trend is likely tied to several years of sharply rising home prices, which have pushed some buyers beyond what lenders consider affordable.

“Competition hasn’t abated as much as we would expect in many parts of the country,” she shared. “So, people could be getting into situations where they’re going back and forth bidding up to get their offer accepted on the home, and when they do, they reach a point where their budget is going to be too strained from a lender’s perspective to afford that home.”

Wood stressed that a mortgage denial does not necessarily mean the end of the road for buyers.

She recommends getting pre-approved at the very beginning of the home search so buyers clearly understand how much they can borrow before making offers.

“You also could potentially aim for making a larger down payment,’ she noted, “so if you’re looking at your target home price, try to aim for a higher percentage of, that will both reduce the amount of the loan, how much you’re borrowing, and it will also potentially lower your debt-to-income ratio.”

Wood said the median down payment for first-time home buyers in 2025 was 10 percent.

Wood also said working with a trusted real estate agent can make a difference, helping buyers focus on homes that realistically fit within their budget and reducing the risk of running into financing issues later in the process.

Desc/SocApplied for a mortgage and heard “no” instead of “approved?” Consumer Investigator Rachel DePompa explains the top reasons buyers are getting denied and how to improve your chances next time.