The loan you apply for isn't always the loan you get. After analyzing your financial statements and evaluating your collateral, a lender can determine that you don't qualify for the loan for which you originally applied. However, that doesn't necessarily constitute a denial. If the lender can offer you something, it will provide you with a counteroffer. The counteroffer may or may not work for you and you may ultimately decide to decline it.
Read the counteroffer letter carefully. It should list the terms for which you applied, the terms the lender is offering and the reasons it would not approve the loan for the requested terms.
Review the counteroffer and determine if it will work in your given situation. If you need $200,000 to purchase a house and the lender only approves $100,000, the offer won’t work. But if you are approved for $200,000 and wanted an additional $25,000 for improvements, at least you can proceed with the purchase.
Contact lenders in the area to gather information about getting a loan elsewhere. Ask specifically about the criteria for which you were denied the original term. For example, if the initial lender won’t give you the terms because of a slightly high debt-to-income ratio, a different lender may have a higher threshold. Make sure you can get a loan elsewhere before turning down the offer.
Contact the individual or department listed on the counteroffer letter. Ask her if there is anything you can do to meet the criteria for the original terms such as provide additional collateral or add a co-signer.
Inform the representative on the phone that you are declining the counteroffer. Do this only in a scenario where you know the lender won't or can’t work with you to get the original terms and the counteroffer simply won’t work for you.
Submit a formal withdrawal letter if requested. Declining the counteroffer over the phone is often enough, but some lenders may want it in writing. The letter doesn’t have to be extensive, just a statement that you do not wish to move forward with the terms of the counteroffer.