What happens if a mortgage application is declined?

Who is this page for?

This page is for people who have had a mortgage application declined and want to know why and what they can do next. 

What happens when a mortgage application is declined?

Getting rejected for a mortgage can be disappointing when you’re excited about buying a new home.

Usually, a mortgage application is declined when you don’t meet the provider’s lending criteria. The reason why might be explained through email, letter or over the phone. Some lenders can’t tell you why an application was refused, however.

You can reapply – but it’s important you understand why you were rejected and deal with these issues first. If you try and quickly apply elsewhere without addressing the problems, you might be rejected again. Lots of failed applications can negatively affect your credit score.

Use this guide to work out what the issue with your application might be and decide your next steps.

Reasons a mortgage might be declined

There are lots of reasons a mortgage might be rejected. Sometimes, it’s just a simple mistake you can quickly change – such as a misspelling or incorrect personal information.

Other times, it could be a larger issue that takes longer to fix, like a low credit rating.

Financial reasons for being refused a mortgage

Your financial situation is normally the main reason a mortgage application is declined. It can be because of: 

  • Poor credit history – Missed or defaulted payments, County Court Judgements (CCJs) and multiple/full credit applications all appear on your credit report. Lenders may think you will struggle to meet the repayments if you have a poor credit history.
  • High level of debt – If you already have a lot of debt, lenders may be unwilling to let you borrow more, as this may be unmanageable for you.
  • Low deposit – You usually need a minimum of deposit of between 5% and 10% to get a mortgage. Anything below this can see your mortgage declined.
  • Affordability rules – If a lender thinks you won’t be able to make the repayments, you can have your mortgage application declined. They will look at your earnings and outgoings before making a decision.
  • Using payday loans – Depending on the lender, payday loans you have taken out might be a factor. Payday loans remain on your credit report for six years. 

Common reasons for being refused a mortgage

Aside from your finances, other factors can affect your mortgage application. These include:

  • Not being registered to vote – It’s a good idea to register to vote before applying for a mortgage, as this allows a lender to confirm that the details you have provided are correct.
  • Time living in the UK – Some lenders specify that you must have lived in the UK for a certain amount of time before you can apply for a mortgage. You may need to provide a visa to prove this. You’ll also need a UK bank account.
  • Self-employed or contracted workers – Being self-employed can be seen as less secure by lenders. If you are self-employed you may have to prove you have a steady income and secured future work. This can be done with tax statements and business accounts.  

What to do if your mortgage application is declined

Firstly, try not to worry. If your mortgage application is declined, you may be tempted to reapply right away. It’s best to wait and take stock of why your application was declined.

Here are some steps you can take if your application is declined:

Find out why your mortgage was declined

Ask why your mortgage application was declined. The mortgage provider may be able to explain why you were turned down.

If they didn’t tell you the reason, try asking which credit reference agency they used. You can check your credit report for any errors and fix them there.

Can a mortgage agreement in principle be declined?

If you don’t pass the lender’s own credit scoring system, they will not approve you for a mortgage agreement in principle (AIP). These scoring systems usually look at the same things as a regular mortgage application.

Even if you’re refused a mortgage agreement in principle, you may be able to apply and be accepted for another lender once you’ve solved the issue that caused you to be refused.

Even after a mortgage is agreed in principle, you can still have a mortgage declined. An AIP is not a guarantee of an offer and is reliant on a full mortgage application and credit check. 

Seek and use financial advice

A qualified mortgage advisor can provide you with some insights as to why you had a mortgage declined.

Debt advice can help lower your credit usage too. This may improve your credit score for future applications.

The content on this page is for reference and does not constitute finance advice.

For impartial financial advice, we recommend government bodies like the MoneyHelper.

Calculators & tools

We have a range of mortgage calculators to help you:

  • Find out how much you could borrow from Lloyds Bank
  • See how much you could save if you make overpayments on your mortgage
  • Get an idea how a change to the Bank of England Base Rate could effect your monthly payments

Use our mortgage calculator and tools >

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