Why Mortgages Can Be Declined

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Why Mortgages Can Be Declined

Having a mortgage declined is a stressful situation, but understanding why it happened will help you move on and find a new mortgage deal.

Most common reasons for a mortgage decline

There are two main causes of a declined mortgage application: either you don’t meet all the lending criteria, or something suggests that you may not be able to afford or repay the mortgage you have requested. 

A decline often results from credit checks. Any of the following could cause affect your credit rating:

  • Missing or making late payments on finance, a loan or credit card 
  • You’re not on the electoral roll or not registered to vote
  • Defaults or County Court Judgements (CCJs) on your credit record 
  • Making too many credit applications in a short space of time 
  • Ever taking out a payday loan 

Sometimes people aren’t even aware that they have missed payments, so it’s a good idea to check your credit report early on in your mortgage journey. 

Other causes of a mortgage decline can include: 

  • Mistakes on the application form, such as an incorrect address or date
  • Irregular income or an income that is too low to meet mortgage repayments
  • Self-employment / contract work where calculating your average income is challenging
  • Recently changing jobs

How can the lender decline me after an Agreement in Principle?

An Agreement in Principle is never a guarantee of a mortgage – it’s a quick indication of what you could borrow. 

Once you formally apply for the mortgage, the lender looks at you more closely and will request proof of earnings to make sure you have a consistent income. 

This may unearth new information, or something might have changed since receiving your Agreement in Principle. Because of that, declines after an agreement aren’t uncommon.

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Will a decline affect my credit score?

A mortgage rejection will not suddenly give you poor credit history. Your credit report will state that you applied for a mortgage, but not whether the application was successful. 

The number of applications on your record does make a difference, however. Each application is noted as a ‘hard search’, and if you have made several of these in a short time it can impact your credit score – as it looks like you are rushing to borrow money. 

Because of this, If your mortgage application gets turned down, don’t apply for another straight away – get advice from a mortgage broker first.

What should I do after I am declined for a mortgage?

First, attempt to discover why the lender refused your application. Not every lender will explain the reason, but a simple error can be addressed in minutes.

Next, take a look at your credit score and see what the main credit agencies say about you: these are Experian, TransUnion and Equifax. If you find an error, contact the financial provider that filed the information and ask them to correct it.

If adverse credit has caused your rejection, it doesn’t mean a mortgage is out of the question. One way to improve your chances is to save up a bigger deposit. Reaching 15% or 20% will give you a wider choice of lenders.

Some lenders offer special adverse credit mortgages, which allow for a less than perfect credit score. These may have slightly higher interest rates than a standard mortgage deal.

How can First Thought Financial help me? 

If you’ve had a mortgage declined, it’s well worth seeking out advice from a mortgage broker. We will find out the cause and match you up with mortgage lenders that will accept you. 

We have lots of experience of helping people in all situations to find an affordable mortgage deal, from first time buyers to home movers and people seeking a remortgage. We work with many lenders that don’t sell direct to the consumer.

Contact us today to see how we can help you.

As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

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