According to mortgage data firm HSH, com, about 8% of mortgage applications are denied, although denial rates vary depending on location and type of loan. For example, FHA loans have different requirements that may make it easier to obtain the loan than other types of loans. Closing costs are used to pay various fees related to buying a home, often between 3% and 6% of the total mortgage loan. Insurers deny loans about 9% of the time.
The most common reason for denial is that the borrower has too much debt, but even an incomplete loan package can lead to denial. Some lenders may issue “pre-approval letters” based on information that isn't fully verified. Technically, that's a process called prequalification, and your subsequent mortgage application could be denied or approved for significantly less money if examined more closely. Prequalification may not analyze your financial information as thoroughly as prior approval and may not subject you to a strong credit check or other important checks on your financial strength.
It's also a cost you'll have to pay every month until your mortgage is paid or until you sell your home.
