What Happens If Your Mortgage Application Is Rejected In Calgary?

If you are planning to buy a home in Calgary, the most important step that many buyers take is to apply for a mortgage.

Sometimes, due to certain reasons, the mortgage application is rejected in Calgary. It is advisable to consult a professional mortgage broker to understand the reasons behind the rejection and the next steps that will improve the chances of approval in future.

What happens if a mortgage is denied in Calgary?

If financing were the condition to buy a home in Calgary, this process may not proceed further if the mortgage is denied.

The buyer can try applying with another lender or improve their financial profile before reapplying. 

If the agreement includes a financing condition, the buyer can cancel the deal without losing the deposit. If there is no financing condition, the buyer may risk losing the deposit or facing legal consequences.

Common Reasons for Mortgage Rejection in Calgary

Before taking action, it is important to understand why the mortgage application was declined. Lenders in Calgary assess several factors before approving a mortgage.

• Low Credit Score: The credit score of the borrower is one of the most important factors lenders check. If they find the score is too low, they see that individual as a high-risk borrower.
• High-Debt Income Ratio: If you have significant debts such as credit cards, car loans or personal loans, lenders may think that handling additional mortgage payments might be tough for you.
• Insufficient Income or Employment History: If the borrower does not have a stable income and consistent employment history, the lenders may reject the mortgage application.
• Low Down Payment: In Canada, many lenders require a minimum down payment depending on the property value. If the down payment is insufficient, the application may be declined.
• Property Issues: Sometimes the issue is not the borrower but the property. Lenders may reject properties that do not meet their lending criteria.

What to do immediately when a mortgage is declined in Calgary?

• Understand the Reason: The first thing you should ask the lender is the reason for rejection. Most lenders will explain the reason, which helps you identify the factors that need improvement.
• Credit Report Review: Next step is to check the credit report for issues or errors that might have affected your application. If there are mistakes, you can dispute them and improve your credit profile.
• Improve Financial Profile: If the rejection was due to financial factors, you may need to pay down existing debts, increase savings for a larger down payment, stabilize employment history and improve credit score. 
• Explore more options: If the traditional lenders decline the application, you can explore more options such as B lenders, private lenders, Co-Signer mortgages, and government-backed programs.

Consider a consulting mortgage broker to increase the Chance of approval.

A dedicated mortgage consultant can be extremely helpful if your application was rejected. Brokers work with multiple lenders and may be able to find alternative lenders who have more flexible mortgage approval criteria in Calgary. They help their clients understand lender requirements, prepare a stronger application, identify lenders aligned with their financial situation and identify lenders suitable for the financial situation of their clients. 

If you are a first-time home buyer in Calgary whose mortgage application is rejected, consult an experienced mortgage broker. The specialist will help you strengthen your application, thus increasing your chances of approval the next time you apply.