Why Mortgage Applications Get Denied (and How You Can Prevent It)

In today’s housing market, getting pre-approved is a smart first step—but it’s not a guarantee. According to Josiah Burdge, a seasoned loan officer, "Pre-approval is the beginning of the process, not the finish line. There are still several hurdles that can trip up buyers if they’re not prepared."

Here are the most common reasons mortgage applications are denied in 2025—and what you can do to avoid them.

1. High Debt-to-Income Ratio (DTI)

The number one reason mortgages are denied today? A debt-to-income ratio that’s too high. This ratio compares your monthly debt payments to your gross monthly income, and lenders use it to determine whether you can realistically afford your new mortgage.

"With home prices still elevated, it’s easy to stretch your budget too far," says Josiah Burdge. "Even if your income is solid, too much existing debt can be a red flag."

How to avoid it: Pay down high-interest debt, especially credit cards and car loans, before you apply. Keep monthly obligations as low as possible and avoid financing big purchases before or during the mortgage process.

2. Credit Score Challenges

While many lenders offer flexible options for buyers with less-than-perfect credit, a lower score can still affect your ability to qualify or secure the best terms.

"Even if you meet the minimum score, a weaker credit profile might mean higher costs or more scrutiny," explains Burdge.

How to avoid it: Keep credit card balances low, pay every bill on time, and avoid opening new accounts while you’re applying for a mortgage. Checking your credit early gives you time to improve it if needed.

3. Insufficient Funds to Close

You’ll need more than just a down payment. Many buyers are surprised by the full amount required to close, which includes closing costs, prepaid taxes and insurance, and potential reserve requirements.

"A strong savings cushion makes a huge difference," Burdge notes. "It shows lenders you’re financially stable and prepared."

How to avoid it: Start saving as early as possible. Even small, consistent contributions to a dedicated savings account can add up. Ask your lender to estimate your total cash-to-close amount early in the process.

4. Financial or Job Changes During the Process

This one catches a lot of buyers off guard: changing jobs, taking on new debt, or co-signing a loan while under contract can jeopardize your mortgage approval.

"Underwriting continues all the way up to closing," warns Josiah Burdge. "Even a well-intentioned move, like financing furniture or switching jobs, can delay or derail your loan."

How to avoid it: Keep your financial profile as steady as possible until after closing. Talk to your lender before making any major financial changes.

The Bottom Line

Mortgage approvals in 2025 are still very achievable—as long as you understand what lenders are looking for and avoid common missteps. As Josiah Burdge emphasizes, staying informed and proactive can make all the difference.

"My job is to guide you through the process with as few surprises as possible," he says. "If we work together from day one, we can catch issues early and keep your path to homeownership smooth."

Sources:
ConsumerFinance.gov, Forbes.com, Mortgage Bankers Association, Experian.com