When your mortgage application is rejected

3. Seek out other opinions
Not every lending firm adheres strictly to the same playbook, and one lender may approve what another rejects, says Savitt, who recently had a borrower with good credit turned down for a low down payment, government-insured loan, but found another firm giving the green light.

A local "community bank," meaning a smaller, hometown institution, may be more flexible, contends Diane Scriveri, chief lending officer at Bogota Savings Bank in Teaneck, N.J., and vice chair of the affordable housing committee of the New Jersey League of Community Banks.

"Because we're local, we may know home values better. We still use independent appraisals of course, but we may look at comparable (home values) differently because we know what's really happening in different neighborhoods," she says.

Credit unions, which only offer loans to consumers who qualify for credit union membership, may also be more forgiving, says Tony Emerson, president of the Credit Union League of Connecticut.

"It would be foolhardy to suggest that in every case, you can go to a credit union and get a loan," Emerson says.

Still, he says, some credit unions may judge loan eligibility based upon the unique relationship they have with their members. For instance, many credit unions offer membership to employees of specific companies and would know more about a member's job stability, he says.

4. Give it another try
The Mortgage Bankers Association is predicting that 30-year fixed rates will hover near the 5 percent range through 2009. So if predictions hold and interest rates stay relatively low, you should have time to try again if the factors behind your rejection improve.

Fortunately, a rejection shouldn't bring down your credit score, says Craig Watts, public relations director for Fair Isaac Corp.

Making a formal application and then reapplying more than a month later could lower your score, but only by about 5 points. Most scoring systems allow consumers to make multiple mortgage applications within a 30-day period without any negative impact on their credit score. But mortgage inquiries older than 30 days will count as a single inquiry if they're made within a 14-day or 45-day window, depending on the scoring model used.

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