Top 10 Reasons applicants are "declined" for mortgages

(Borrowed from the Columbus Board of Realtors Web Site)

The primary reasons applicants are "declined" for mortgages include
(1) no credit file (usually because the applicant pays cash and has little or no established credit)

(2) insufficient information in the applicant's credit file

(3) insufficient income

(4) short time on the job – at least two years in the same field are usually required by most lenders

(5) slow pay and/or poor credit history indicated by a low FICO

(6) judgments, garnishments, liens or past bankruptcy

(7) accounts sent to collection agencies

(8) current bankruptcy, which is not discharged

(9) foreclosure and

(10) repossession (usually an automobile or furniture).

No credit or insufficient credit can often be overcome, such as by showing timely payment of rent and utilities. But the other reasons for "decline" are usually more difficult.
Just one negative item on your credit report, such as being more than 30 days late with a payment, which is reported to the credit bureaus, can cause either rejection of a mortgage application, or loan approval at an above-market interest rate.
Of course there are some mortgage lenders who will approve loans to applicants who have these "credit challenges." But such lenders will charge high interest rates to compensate for their very high risks.

The bottome line though, is that in today's age of super-specialized loans, it's difficult to get turned down for a loan. There seems to be a package out there for every buyer. It may be a higher interest rate than the buyer wanted but they are so thrilled they can buy a home, they don't really care--even if it's less of a home than they'd hoped for, it's still their home.