The joy of owning your own home is sometimes quashed when a lender rejects your mortgage application, but the fact that your application has been rejected doesn't mean you are denied homeownership forever.

It's important to know your rights as a credit applicant. The fair credit and fair housing laws of the U.S. and your state require that a lender treats all applicants the same regarding of race, age, sex, religion and sexual preference.

To make things clear, the lender is required to disclose to you the reasons for the rejection of your application. Most of the reasons for a rejected loan application are:

• Unsatisfactory credit history
• Too much debt
• Insufficient income
• Inadequate funds
• The appraised value of the property is too low

Unsatisfactory Credit History
There is nothing more damaging to your application than a history of poor debt repayment. Lenders sometimes can stretch their loan underwriting guidelines on debt ratios or income requirements, but rarely can a lender tolerate a bad credit record.

If your loan is turned down because of a poor credit report, you are entitled to a free copy of the report from the credit report bureau, which will be identified from the lender's notice of rejection. Examine the report carefully to see whether it's accurate and up to date. By law, the credit bureau must correct any errors in the report. If there are disputes over certain accounts, the bureau is required to include your side of the argument in the report. Many people have the same name and improper recording of data can occur easily but rarely. Even if the name on the report is yours, make sure all the accounts and references apply to you.

If the adverse items on the credit report occurred because of illness, marital problems, layoffs or other circumstances beyond your control, provide the lender with a written explanation at the time of the loan application. If it's too late for that application, include the explanation in future applications.

Make sure that if you’re planning to buy a home anytime within the next 12-18 months that you begin the process early by first taking a look at your credit situation and getting yourself in the best shape possible before submitting an application for a mortgage.

Many new homebuyers make the mistake of starting the home buying process by riding around looking at houses. Working to improve your credit standing should always be the very first thing you tackle, since it could easily take 3-6 months to work through whatever credit issues you have that could keep you from being able to buy a home if not addressed early.

We offer a low cost credit repair service for people wanting to buy a home, but need to take care of past credit problems first. With our years of experience in the real estate industry, plus our connections with mortgage lenders all over the country, we know exactly what your credit report needs to look like in order to get approved to buy a home.

From bankruptcies to charge-offs to tax liens, we’ve helped challenge virtually every credit problem under the sun and deleted hundreds of negative items.

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Too Much Debt
Extensive use of numerous credit cards and revolving accounts often damages the cardholder's credit history. The solution is to pay off some of the accounts to bring down outstanding debts and the number of creditors.

In assessing your ability to pay, lenders look at your monthly income in relation to your proposed mortgage payments and to all of your monthly debt and installment loan payments. Typically, your mortgage payment should not be more than 28 percent of your monthly gross income. Your total debt, including mortgage payments and other installment payments, should not be more than 36 percent. The percentages are slightly higher for loans from the Federal Housing Administration. Substantially higher ratios can cause the lender to deny the loan.

If you can show that you are already carrying a comparable housing expense through rent or mortgage payments, you may be able to persuade the lender to reconsider the rejection. This is why full and accurate disclosure of your financial obligations in your loan application can work in your favor.

Inadequate Funds
If a lender determines that your do not have enough cash to make the downpayment and cover closing costs, you may get a gift from a relative—so long as no repayment of the gift is expected.

You also might try to get the seller to pay some of the closing costs. Of course, you can simply wait until you have sufficient funds to close.

Another solution would be to persuade the seller to take back a second mortgage, which would reduce the downpayment requirement. This is usually in the form of a loan to you with a slightly higher than market interest rate as incentive for the lender. The lender gets a promissory note from you detailing the terms of payment using the property as collateral. This form of loan is often called an owner take-back.

An even better solution is to apply for one of the many downpayment assistance programs that exist in today’s market. Downpayment assistance programs help thousands of home buyers purchase homes with a streamlined process of applying for, and obtaining, some form of down payment help. The average program can provide you with as little as $1,000 to over $5,000 or more that can be used to help you purchase a home. Be sure you work with a good Realtor, because a good real estate agent can lead you in the right direction of the best program to fit your needs.

Low Appraised Value
One of the factors used by the lender to assess your loan application is the ratio of the loan amount to the sale price or the appraised value of the property, whichever is lower. If the appraised value is substantially lower than the purchase price, the loan-to-value ratio, or LTV, may be higher than what the lender will or can legally approve. Your alternatives will depend on the reasons for the low valuation.

An Appraised Value  is an opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Loan-to-Value (LTV) Percentage refers to the relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage of 80 percent.

If the purchase price is higher than the prevailing prices being paid in the vicinity, you can try to renegotiate the price with the seller down to a level in line with the market and one that the lender would accept. If this is not possible, your only alternative would be to accept a lower loan amount, which might mean getting a less expensive house.

As you can see, some of the problems with a loan rejection can be resolved quickly, and some may take longer, but you can turn around most of them if you have the right people on your side to help resolve the problems.

Malik Watson is a Realtor with in Atlanta, GA. He writes and publishes numerous articles annually on the Atlanta real estate market for the general public. With over 7 years experience working with everyone from first-time home buyers to seasoned sellers and investors, he can assist you with all your real estate needs in all 14 counties of metro Atlanta. No matter if you’re looking for a house, a loft, a condo, or a townhome…from $100,000 to over $1 million and beyond, the Watson Team specializes in “Getting Results That Move You”. Feel free to contact us at anytime for additional information. www.atlantalifestyle.com