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Mortgage Lenders Turn Down About 1 In 10 Florida Buyers

LendingTree study: The number of buyers approved for a mortgage loan has hit a post-recession high, but of 50 cities with the most denials, the top four metros for loan turn-downs are all in Florida.

ORLANDO, Fla. – Mortgage denials have fallen to their lowest rate since the financial crisis – back to 2004 – according to data from the Home Mortgage Disclosure Act.

Still, that doesn’t mean all borrowers on the path to homeownership qualify for financing. Nearly one in 10 borrowers are denied a mortgage, according to a new analysis from LendingTree, and out of 50 U.S. cities listed for the most mortgage denials, Florida takes the

top four spots. Miami leads the U.S. in mortgage turn-downs at 11.6%, but lenders in all four Florida cities turned down about 1 out of every 10 mortgage applicants.

The No. 1 reason lenders cite for turning down mortgage applications is a problem with a borrower’s debt-to-income ratio. It was the top reason in all Florida cities and in 47 of the 50 cities analyzed by Lending Tree. Only three cities – Birmingham, Ala.; Memphis, Tenn. and Louisville, Ky. – listed credit history as their borrowers’ biggest problem.

For the study, LendingTree researchers analyzed more than 10 million applications available through the Home Mortgage Disclosure Act to see where and why mortgage shoppers are getting denied.

“Most reasons for denial are financial, but some are not borrower-specific, such as concerns about the collateral,” says Tendayi Kapfidze, a LendingTree chief mortgage economist, who led the study. “The low denial rate is encouraging, though some of this is because the financial profile of mortgage applicants has improved. The key for homebuyers is to be well educated on the homebuying and mortgage process. Understanding the key reasons mortgages are denied can help borrowers avoid missteps and compete effectively to secure their dream home.”

Reasons cited for mortgage denials:

  • Debt and credit history: A potential borrower’s debt-to-income ratio at 33% and credit history (which includes credit score) at 23% was the chief reason for denials
  • Inspections and appraisals: 17% centered on the value of the loan’s collateral
  • Incomplete applications: About 13% of applicants left out important information
  • Unverified information: About 8% had information that the lender could not verify

In some metros, denial rates rose up to nearly 12% of mortgage applications, while in others they were as low as 5%, researchers note.

The top 50 metros that had the highest percentage of borrowers receiving a mortgage denial:

  1. Miami – 11.6% denial rate
  2. Orlando, Fla. – 10.9%
  3. Tampa, Fla. – 9.5%
  4. Jacksonville, Fla. 9.5%
  5. Detroit 9.4%
  6. Birmingham, Ala. – 8.8%
  7. Houston – 8.7%
  8. San Jose, Calif. – 8.7%
  9. New York – 8.5%
  10. San Antonio – 8.4%
  11. Los Angeles – 8.3%
  12. Atlanta – 8.2%
  13. Riverside, Calif. – 8.0%
  14. New Orleans – 7.8%
  15. Louisville, Ky. – 7.7%
  16. Providence, R.I. – 7.5%
  17. San Francisco – 7.5%
  18. Hartford, Conn. – 7.4%
  19. Denver – 7.3%
  20. San Diego – 7.3%
  21. Charlotte, N.C. – 7.3%
  22. Las Vegas – 7.3%
  23. Austin, Texas – 7.2%
  24. Sacramento, Calif. – 7.1%
  25. Oklahoma City – 7.1%
  26. Buffalo, N.Y. – 6.9%
  27. Chicago – 6.6%
  28. Dallas – 6.6%
  29. Memphis, Tenn. – 6.6%
  30. Philadelphia – 6.6%
  31. Pittsburgh – 6.6%
  32. Cincinnati – 6.5%
  33. Columbus, Ohio – 6.5%
  34. Cleveland – 6.5%
  35. Nashville, Tenn. – 6.4%
  36. Milwaukee – 6.2%
  37. Phoenix – 6.1%
  38. Baltimore – 6.1%
  39. Indianapolis – 6.0%
  40. Seattle – 6.0%
  41. Raleigh, N.C. – 5.8%
  42. Richmond, Va. – 5.8%
  43. Boston – 5.8%
  44. St. Louis – 5.7%
  45. Washington – 5.7%
  46. Portland, Ore. – 5.5%
  47. Virginia Beach, Va. – 5.2%
  48. Kansas City, Mo. – 4.9%
  49. Salt Lake City – 4.9%
  50. Minneapolis – 4.6%

Source: “LendingTree Analysis Reveals Mortgage Denials at Cycle Low,” LendingTree (Oct. 7, 2019)

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