Having a mortgage declined can be highly disappointing and frustrating, often slowing down or putting an end to homeownership plans you may have.
Understanding why a mortgage application has been declined and what to do next will allow you to be better prepared for your next application, no matter your circumstance.
Since each lender is different when it comes to the lending criteria they assess mortgages against, just because your application was rejected by one lender, it doesn’t mean you’ll be rejected by another. It’s all dependent on the specifics of the assessment criteria that each uses.
With this in mind, discover below the various reasons a mortgage may have been declined and what to do next.
Why might my mortgage application be declined?
There are several reasons why a mortgage application gets rejected, however, there are a few common reasons why lenders won’t accept applications:
- Poor credit history because you’ve missed or made late payments in the past
- Defaulted credit account or CCJs in the past six years
- Too many debts and payday loans in a short period
- Not being registered on the electoral register
- Administration errors
- You didn’t pass their affordability assessment
- Too many credit applications made in a short period (especially within the last six months)
- Being self-employed and not able to show consistent income
- The type of mortgage you applied for was wrong for your circumstances
If your mortgage in principle has been declined, it usually means the minimum criteria hasn’t been met. Speak to one of our experts who can look over your application to ensure you aren’t making these simple mistakes.
If my mortgage application has been declined, what do I do next?
If your mortgage application has been declined, there is a strong chance you still have options and that the lender who you applied with wasn’t right for your current financial situation. Every lender has a different policy for what is and isn’t acceptable, and some specialise in complex financial circumstances. Just because one lender rejects your application, it does not mean that all will.
At Help to Buy, we believe that complex circumstances shouldn’t stop you from acquiring a mortgage. No matter the reason for your application rejection, whether that’s your personal circumstance or bad credit, we will endeavour to help you figure out what went wrong so you can get in touch with the right lender.
What can I do if I’ve been declined a mortgage in principle?
Usually, when you have been declined a mortgage in principle, this is because you haven’t passed the relevant lender’s internal affordability checks. Each mortgage provider uses a different scoring system to evaluate every aspect of your application against their criteria before being approved.
Some specialist mortgage lenders will have more flexibility when it comes to approving applications that have faced initial rejection. Speak to one of our experts who will be able to advise you on the best course of action for moving your application forward at this early stage.
Why was my mortgage declined after an agreement in principle?
Mortgage providers will carry out thorough checks of your application, including your credit history, so your mortgage may be declined after an agreement in principle if they find something that doesn’t meet their minimum lending criteria.
Some of these reasons could be:
- You’ve not been employed for long enough
- You don’t have a long enough address history (lenders prefer at least three years)
- You haven’t registered on the electoral register at your current address
- Recent bad credit events
- Having a high loan-to-value (LTV)
- Having a high loan-to-income (LTI)
- Your deposit has come from a gift and not from savings, or you haven’t contributed any funds to even partially match the gifted deposit
- Lying on your application, advertently or inadvertently committing fraud
Despite this though, you still have options when it comes to applying for another mortgage. This is because often a full mortgage decline occurs due to your lender being inflexible when it comes to certain specifics of the application. This can happen when your broker doesn’t do their research and submits an application to a lender that was never going to approve the application in the first place.
At Help to Buy, we ensure that we carry out thorough and complete research on your application the first time around before matching you with the most appropriate lender.
Why has my mortgage application been accepted in principle then declined at a later stage?
Having a mortgage application declined at any stage is frustrating, but getting over the first hurdle thinking you’re all set before being stopped in your tracks is stressful. Unfortunately, this can happen, usually for one of two reasons:
- Adverse credit: while taking a deeper look at your application, your lender may have found undisclosed adverse credit information that will negatively impact your application. This is because it could appear as though the borrower is lying on the application to make it stand out. Our expert advisers will find you a lender who will accept applications no matter the adverse credit events, including late payments, defaults and CCJs.
- You didn’t meet their policy criteria: Some lenders have strict policies that mortgage applications need to adhere to, and on deeper review, your application may just not match with the policy. If this is the case though, this isn’t completely a waste as it means you were deemed creditworthy and passed the initial credit scoring system, you just didn’t pass something in that lender’s policy which you could pass at another lender.
With all applications that are declined though, the first thing you need to do is confirm what went wrong by talking to the lender and asking them for more information. In some cases it may simply be changing incorrect information filled out on the application, but if it is a credit issue, they may not be able to disclose the information due to data protection laws. If this is the case you will need to check your independent credit report to see where the issue is. However, if the decline was due to a policy issue, it’s best to try and find this out as another lender may be better suited to your application.
At Help to Buy we can help you understand your credit report and match you with a specialist lender who is suitable for your circumstances.
Can I appeal a declined mortgage
Unfortunately, if a mortgage has been declined by an underwriter, appealing the process is often futile.
The underwriters will rarely overturn the decision, especially if there is no good reason or further evidence to support the application that wasn’t known at the point of review. If this is the case, it would be better to seek out a specialist lender with a different policy which might be better suited to your needs. Get in touch with one of our experts today, who will be able to discuss your options with you.
Mortgage declined after the valuation
Even though you may have already had a valuation of the property you want to buy, mortgage lenders will often carry out their own valuations too. If the application is declined at this stage, it is often due to the valuation report flagging up concerns that make the lender question its suitability as security, or the report has down-valued the property.
Down-valuations are tricky to fight back against if there are no comparable properties of similar construction that have sold recently in the same area.
Unfortunately, if the construction and material type of your property aren’t within the lender’s policy, nor is the property structurally sound or needs significant repair work before it is habitable, it will make the property unsuitable and the mortgage declined at valuation.
All is not lost though, properties that are considered an unacceptable construction type with one lender could actually be acceptable with another, so always check around lenders before making an application.
Mortgage declined after an exchange of contracts
Even though this event is extremely rare, having a mortgage declined after an exchange in contracts can still happen. Not to worry though, there are still lenders who will offer a mortgage at this later stage, which, at Help to Buy we can get you in touch with.
If your application is refused at this stage, it is likely due to historical adverse credit problems that your advisor should have disclosed during the application process. Before the application is even made, your advisor should make everything apparent to the lender, including carrying out a thorough credit search, so that there are no unexpected surprises like adverse credit. If credit issues are found and are outside of the lender’s policy, they are within their right to withdraw any formal offer to lend, even after the exchange of contracts.
To find out your credit score, check out our comprehensive guide here.
Mortgage declined at the last minute
You’d hope that your application doesn’t get declined at the exchange stage, but unfortunately it can happen. Luckily you can take action to address the issue straight away by being in communication with the lender to find out what went wrong.
Mortgage declined after a full offer was made
Even after a full offer is made, lenders still have the right to decline a mortgage application up to the point of completion. Reasons for this include not meeting the lending criteria or finding an error in your application, such as incorrect address history or income. Also, if adverse credit isn’t disclosed at the beginning of the application but is found later, this could lead to the application being rejected.
What can I do if my mortgage was declined due to a low credit score?
Some specialist lenders will still provide you with a mortgage even if you have a low credit score. You could have a low credit score for a number of reasons including:
- Not being on the electoral register
- Having too much debt
- Being in your overdraft
- High levels of borrowing
- Recently started a new job or having a high-risk job (such as lorry drivers or construction workers)
Luckily, you can improve your credit score with a few simple steps while you discuss your position with one of our specialist brokers.
Be aware though, having multiple credit searches within a short space of time could negatively impact your chances of succeeding a mortgage as hard credit searches stay on your record for twelve months. If you are planning to apply for a mortgage after it has been declined, ensure that you have addressed any outstanding credit issues that were flagged in the report the first time around to prevent yourself from sustaining any unnecessary fees. Lenders will look more favourably on rejected applicants who have taken the time to improve their application.
What to do if your mortgage is declined due to income and affordability
What is considered a ‘stable’ and ‘acceptable’ form of income can be considered differently depending on which lender you pick. Some lenders may place more importance on factors like having a long working history and a permanent contract, while others will be happy to lend to people in probationary periods, self-employed or based on future contracts not initiated yet. Speaking to one of our specialist brokers about your financial situation will ensure that you find the right lender for your circumstances.
In terms of affordability, again, each lender is different when it comes to calculating feasible maximum borrowing levels. Some work out your borrowing amount by taking your annual salary and multiplying it by three, four, or five, while others will calculate what you can reasonably afford month-to-month and factor in rate increases as a ‘stress test’. Depending on your financial situation, a specialist broker will be able to direct you to the most suitable lender.
What can I do if I’m self-employed and have been declined a mortgage?
We understand that being self-employed comes with its own stressful challenges, especially with the number of myths around ‘self-employed mortgages’. However, don’t despair, a lot of these myths aren’t true and there are plenty of specialist lenders who will allow you to borrow from them, even if you have been declined by another lender.
To improve your chances of acquiring a mortgage when you are self-employed, consider the following:
- Put your spouse as the first name on the mortgage if they are salaried
- Increase your income by retaining as much profit as possible if you can
- Postpone major business changes (in structure or type) to show stability
- Have at least two years worth of accounts to show your expenditure
- Use a specialist self-employment mortgage broker who has experience with anticipating problems in advance
I’m trying to buy my first home but the mortgage got refused: what do I do?
Lenders often won’t refuse your mortgage application just because you are a first-time buyer, usually, the rejection will be due to other factors like bad credit or affordability. Check out our tips above on how to improve your bad credit score.
If you are a first-time buyer, you need to be aware that some lenders will place additional requirements on borrowers due to the high risk associated with lending to you. Don’t be put off by this, however, as it is still possible to obtain a mortgage as a first-time buyer, it would just be best to speak to a specialist broker to help guide you through the process.
Let us help you navigate a declined mortgage
At Help to Buy, we believe that no matter your mortgage circumstances, we are here to help you achieve that dream home you have always wanted. Even if you have been declined a mortgage by other lenders, our specialist brokers will work with you to understand your individual position to ensure you are matched with the right broker going forward.