Where Is It Most Difficult to Qualify for a Mortgage in the U.S.?

Getting a mortgage is often the biggest hurdle in the path to homeownership and for many Americans, it’s far from guaranteed. A new analysis by the National Association of Realtors® (NAR) sheds light on which U.S. states had the highest and lowest mortgage application denial rates in 2023.

The findings show a clear divide across regions, with Southern states posing the biggest challenges for borrowers. In contrast, several states in the Midwest and North ranked as the most accessible for buyers seeking loan approval.

The Toughest States for Home Loan Approval

According to the NAR report, Mississippi led the nation in mortgage denial rates last year, with 19% of all applications rejected. Close behind were Louisiana (18%) and West Virginia (15%), forming a trio of Southern states where securing financing was most difficult.

On the other end of the spectrum, states like Alaska, North Dakota, and Nebraska had some of the lowest rejection rates, making them more favorable for homebuyers in terms of credit access.

Why Applications Are Being Denied

Realtor.com® Chief Economist Danielle Hale pointed out several common reasons why lenders say “no” to prospective buyers:

• Insufficient credit history or recent changes to credit scores
• High debt levels or increases in debt before closing
• Lower income than initially estimated
• A debt-to-income (DTI) ratio that exceeds lender guidelines
• Loan-to-value (LTV) issues, often tied to small down payments or appraisals that come in lower than expected

“Even when a home seems affordable on paper, financing terms, interest rates, and access to credit can make or break a deal,” Hale said.

Loan Type Matters, Too

The type of mortgage plays a big role in approval odds. Jumbo loans those above the FHFA’s conforming loan limit of $806,500 and nontraditional mortgages tend to carry higher denial rates.

The structure of these loans often introduces more risk to lenders, especially when applicants don’t meet tighter credit or income benchmarks.

“State-level differences in borrower profiles, loan types, and housing costs help explain why some areas see more rejections than others,” Hale added.

Denial Rates by Demographic Groups

Beyond geography, race and ethnicity also impact mortgage outcomes. The report found that Black (21%) and Hispanic (17%) applicants were significantly more likely to be denied loans than white (11%) or Asian (9%) applicants.

Much of this disparity comes down to financial factors like:

• Higher debt-to-income ratios
• Less favorable credit histories
• Greater reliance on FHA-backed loans, which have more lenient down payment requirements but typically come with higher interest rates and fees

“These differences in loan access and pricing ultimately raise the cost of homeownership for many minority borrowers,” the report noted.

States with the Highest Denial Rates by Group

The NAR also broke down mortgage rejection rates by racial and ethnic group across various states. Here’s where denial rates were most pronounced:

• White applicants:
  • West Virginia – 17%
  • Kentucky – 17%
  • Mississippi – 16%
• Black applicants:
  • Louisiana – 34%
  • Mississippi – 33%
  • South Carolina – 33%
• Hispanic applicants:
  • Louisiana – 21%
  • Mississippi – 20%
  • New Mexico – 20%
• Asian applicants:
  • Maine – 12%
  • Florida – 11%
  • Montana – 11%

Final Thoughts

The ability to buy a home isn’t just about listing prices or income it’s also about access to fair, affordable financing. While the mortgage landscape has improved in many ways, these findings show that challenges remain especially for minority groups and buyers in the South.

If you’re planning to purchase a home, improving your credit score, reducing your debt, and understanding your loan options can increase your chances of approval no matter where you live.