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Refinancing Report Breaks Down Reasons for Rejection, and More

Even as gradually rising interest reduces the pool of well-qualified refi candidates, rates remain 30 basis points lower than they were one year ago.

That means a great many homeowners can still save on their monthly mortgage payments by refinancing.

LendingTree recently analyzed data for more than 2.8 million mortgage-refinance applications in the nation’s 50 largest metropolitan areas and found that nearly 83% of mortgage refinances were approved.

For the 17% of applications that were not approved, LendingTree analysts uncovered the following, which they call the top-four reasons for denial:

For 26.5%, a too-high DTI ratio was why the application was denied; a lackluster credit history thwarted 23%; incomplete credit applications were a problem for 18.5%, and insufficient collateral was the main reason that kept 14.9% of denied applications from being approved.

DTI can be an especially difficult-to-overcome barrier in expensive areas including Los Angeles, San Jose, California, and New York, according to LendingTree VP and Chief Economist Tendayi Kapfidze.

Further breaking down the data by region, he adds that poor credit was a significant problem in southern metros including Louisville, Kentucky, Memphis, Tennessee, and Birmingham, Alabama.
Refinancers in Sacramento, California, Phoenix, and Riverside, Calif., were the most likely to be denied because of an incomplete application. Kapfidze added that Home Mortgage Disclosure Act (HMDA), from where LendingTree derives its data, doesn’t specify why applications were left incomplete, so, he says, "it’s difficult to say why so man

y applications are denied for this reason."

"Make sure everything in your refinance application—from your tax records to your employment history—is both complete and accurate and that you have paperwork to back up what you wrote down," he advises refinancers. "Be proactive and gather all of the documentation you’ll need for a refi application so your loan approval isn’t derailed."

Borrowers in areas where home prices are relatively low like Pittsburgh, Detroit, and Buffalo, New York, struggled the most with collateral, he said.

Overall, refi applicants in Salt Lake City; Portland, Oregon; and St. Louis were most likely to find approval.

Those in Miami, Houston, and San Antonio fared the worst. Find LendingTree's full report at LendingTree.com.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media/Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning news, among others. Contact Christina at [email protected]

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