Which Bank Is Most Likely To Reject Your Mortgage?

If you apply for a mortgage at one leading Southern bank, you have an almost 90% chance of approval.

But apply at a competing top New York-based bank, and your odds of approval drop closer to 60%.

We know that getting a mortgage can be challenging in today’s market, but how can banks differ so significantly in their underwriting standards?

“Despite the fact that large lenders sell most of their mortgages to government agencies, many require applicants to clear hurdles that surpass federal guidelines,” writes financial reporter AnnaMaria Andriotis, studying mortgage data released by the Federal Financial Institutions Examination Council.

Most lenders “add an extra layer of requirements on top of the federal guidelines,” say researchers, to avoid taking a loss on bad mortgages that could be returned to them by picky government mortgage buyers. That results in the wide range of rejection rates (see the rejection rates at leading banks in the table at the end of this article).

The study’s sponsors have some helpful tips for mortgage applicants.

“For home buyers, the findings underscore the importance of casting a wide net when shopping for a mortgage.”

Mortgage applicants should try individual banks as well as mortgage brokers who can direct applicants to the bank most likely to approve borrowers with a financial profile similar to theirs.

Even if denied, applicants should try, and try again, say researchers.

“Home buyers who get rejected for a mortgage at one large bank could get approved at its competitor—assuming they know not to give up the search,” says Andriotis.