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.

Understand why your mortgage application was declined

Even after you get an AIP, a mortgage application can still get declined. An AIP is not a guarantee of a mortgage offer. It will be reliant on a full mortgage application and a hard credit check.

Here are some reasons why you may not meet the mortgage lender’s criteria.

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.

Can I re-apply?

You can re-apply, but don’t be tempted to re-apply straightaway. Go back and try to work out the reason for the refusal, fix any issues, and try again. If you quickly re-apply elsewhere, without fixing the issues, it may happen again. And multiple failed applications can negatively affect your credit score making things even harder for you.

You could lose your home if you don’t keep up your mortgage repayments

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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