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What happens when a mortgage application is declined?
Getting rejected for a mortgage can be disappointing. Especially when you’re excited about buying a new home. But it’s not the end of the road, you can re-apply.
We can help you understand some of the reasons why applications get declined and what your next steps are.
Common reasons for being refused a mortgage
Your mortgage provider may be able to explain why they couldn’t offer you a mortgage. If they don’t, ask which credit reference agency they used. Check your credit report with that agency for any errors and see if you can fix them.
Common reasons include:
- Misspelt or incorrect personal information.
- You are not registered to vote. Being on the electoral register allows a lender to confirm that the details you have provided are right.
- Your personal circumstances may have changed in this time.
- Time living in the UK. Some lenders check how long you have lived in the UK. And if you have a visa and a UK bank account.
- Self-employed or contracted workers. Your lender may see this as not having a secure income. You will need to show you have a steady income and guaranteed work.
Financial reasons for a mortgage refusal
Mortgage applications are declined for financial reasons too.
- Poor credit history. You’ll need to have a good credit history. If you’ve missed or defaulted on payments, it may affect your ability to get a mortgage until this improves. County Court Judgements (CCJs) or multiple/full credit applications on your credit report will also impact your credit score.
- High level of debt. If you already have debts, lenders may be unwilling to let you borrow more.
- Low deposit. Aim for a minimum deposit of between 5% and 10% of the house price. The more you can put down, the better.
- The lender may have changed their criteria or something new may have been identified following the hard credit check.
- Affordability. You’ll need to show your lender that you are able to make the repayments. They’ll look at your earnings and outgoings.
- Using payday loans. Some lenders don’t like it if you’ve taken out payday loans.
Get financial advice
A qualified mortgage adviser can give you insights as to why you had a mortgage declined. You can speak to one of our mortgage advisers in a way that suits you.
Debt advice can help lower your credit usage too. This may improve your credit score for future applications.
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