The vast majority of mortgage applications get approved, especially when they’re taken by an experienced loan officer who conducts a thorough review of the loan package before it’s submitted. In this month’s Mortgage Minute we uncovered some of the reasons why applications are declined.  

Your loan officer or mortgage broker is not the person who decides if your application is approved or not. That’s an underwriter’s job.  

But, the best loan officers will “red flag” an application that they have any doubts about, and they’ll consider alternate ways to structure a transaction, or they’ll preemptively ask for an underwriting exception before a file is officially submitted for approval or decline.  

Since we know that some mortgage applications do in fact get declined, logic dictates that not every loan officer is the best loan officer.  

Matt Reid, who is a branch manager with Cross Country Mortgage in Rockland County, NY, estimated that 75% of mortgage declinations could be blamed one way or another on loan officer error.  

“They just don’t do their job well enough up front,” he said.  

I happen to agree with Reid. Having spent 15 years as a Loan Officer, I feel comfortable stating that most of these errors are due to inexperience or carelessness.  


There is quite a bit of material for a new loan officer to absorb. For instance, “know your guidelines” is a mantra that plays on repeat behind closed doors with most mortgage lenders. There are dozens of loan programs and the guidelines for each program can be several pages long, not to mention, they’re always changing. It’s a lot to digest.  

There’s more.  

A contract of sale with 2 dozen pages of legal jargon might take a while for a new loan officer to fully comprehend. It’s also important for a loan officer to understand title reports and appraisal reports and offering plans, which are as long as the Iliad and the Odyssey when you stack them together.  

Consider this scenario: Some self-employed mortgage applicants own multiple companies and multiple properties and they file tax returns that are several dozen pages long for each of their companies. A loan officer needs to understand all the numbers on the various line items in those tax returns so they can accurately calculate that applicant’s qualifying income. Figuring out and remembering which numbers get added to the final income total and which ones are subtracted takes time to master, more time for some than others.  

New loan officers are eager to submit an application whenever they get a chance. The more they submit, the more money they’ll earn. So even when they don’t understand a semi-complex set of tax returns, they’ll submit the application with two fingers crossed, hoping that the income listed by the applicant is going to hold up under the scrutiny of a seasoned underwriter. Guess what? It doesn’t always hold up! 

By the way, not understanding tax returns is an issue that applies to more than just newbies in the mortgage industry. I’m going to say that 52% of all loan officers can’t appropriately analyze corporate tax returns, and when they submit an application, most of them cross their fingers too.  

The overriding theme is that there is an ungodly number of documents to sift through to make sure people are qualified to borrow the money they’re asking for. When you’re new, you’re less familiar with all of these documents compared to someone with several years under their belt. A new loan officer’s lack of experience could lead to an error that ultimately results in a declination.  


Some loan officers get so busy that they develop careless habits in an attempt to save time. They make assumptions that a contract will have boilerplate language, or they assume an applicant’s bank statements won’t show any large cash deposits that can’t be sourced or used in the transaction. There are at least 40 other careless assumptions that could prevent a loan officer from catching a problem before it becomes unfixable.  

It’s a loan officer’s job to review all of the supporting documentation that gets submitted with a mortgage application, like the applicant’s pay stubs and bank statements, or the contract of sale. When a loan officer stops reviewing files or their review is done in a much less thorough way, they might unwittingly let a “problem file” make its way to an underwriter.  

When is it the Applicant’s Fault? 

“Most clients want to be led and they’ll do whatever is asked of them,” Reid said. But there are instances in which they forget to ask for guidance or assume their actions will have no bearing on their application.  

Reid said that one of his recent clients purchased a car after his mortgage application was “cleared to close,” but before the closing actually took place. The new car payment was $580 per month. Luckily for all parties involved, the new expense didn’t push the client’s combined monthly obligations to a point where their debt-to-income ratio was too high to qualify. 

There are a lot of “little things” that could turn into big problems during a mortgage application according to Reid, like opening a credit card during the process, which could cause an applicant’s credit score to drop below what the guideline calls for. A client might also move their money around from one bank to another, which wouldn’t necessarily create an issue that would lead to declination, but it certainly can make the process more difficult.  

“If you’re going to make any major financial decisions while you’re applying for a mortgage, ask your loan officer first!” 

Occasionally, applicants don’t divulge information that is extremely relevant to the transaction, according to Reid’s colleague Al Rapoport, who also works for Cross Country Mortgage out of its Cranford, NJ location.  

Sometimes the client doesn’t understand how impactful a seemingly minor detail can be. For instance, he said there were different rules in place for calculating income for a full-time salaried nurse compared to calculating income for a nurse who works a full-time schedule, but is paid as a per-diem employee, especially if they don’t have a lengthy history of working in that capacity.  

More often than not, it’s an honest omission that comes back to haunt the application, but there are instances in which an applicant is trying to hide something. 

“Sometimes, they do lie to you,” Rapoport said.  

The most glaring instance of deception that I can remember from my time as a loan officer was the blatantly fraudulent use of someone else’s social security number. There are all kinds of checks and balances happening behind the scenes, so it’s not easy to get away with that type of deception.  

An underwriter called me into her office and asked me what I knew about the applicant, a man in his late 30s. I didn’t know much. He was referred by a real estate agent who I had worked with before. The underwriter and I double-checked the application and the supporting documents to see if I had incorrectly listed the social security number. There were no mistakes on my end — I did use the number provided by the client. Then the underwriter let me know that the social security number used by the client belonged to a woman who passed away several years before when she was in her 90s.  

What Else Can Go Wrong? 

David Shopovick is a longtime loan officer with Chase in Manhattan. On average, he said he closes around 100 mortgages every year and he averages fewer than 10 declinations.  

“There are some things that you just can’t control,” Shopovick said, specifically citing low appraised values and condo or co-op buildings that are not financially stable.  

During the course of the mortgage application process, new information is constantly introduced. Title reports can reveal unexpected tax liens against an applicant or against a property. A tax search might reveal a higher annual tax bill than what was listed on an application. All of these things can change the dynamic of an application.  

Rapoport has a reoccurring feature on LinkedIn called #TuesdayUnderwritingUpdate in which he discusses extremely specific situations and the rules that can make or break a mortgage application. The intent is to inform and to draw attention to the pitfalls that could derail a transaction. Reid described Rapoport as a compliance buff, but Rapoport said studying guidelines and posting about it helps him to stay connected with real estate agents who want to work with a loan officer who can spot mistakes before they occur. “I’ve positioned myself as an expert in this area,” he said.