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If your mortgage application is turned down, there are a few things you can do to boost your chances the next time around. Don’t rush to another lender because each application will appear on your credit report.
When you’re excited about buying a new house, being turned down for a mortgage can be discouraging.
When you don’t meet the lender’s loan conditions, your mortgage application is typically turned down. The reason for this could be clarified via email, letter, or phone. However, some lenders won’t tell you why your application was turned down.
You can reapply, but it’s important that you understand why you were denied in the first place and address these issues. You can be rejected again if you try to submit your application with another lender before fixing your credit issues. A large number of unsuccessful applications may have a negative impact on your credit score.
“Mortgage Declined” are the last words any home buyer wants to hear. It doesn’t have to be the end, though.
Use this guide to figure out what’s wrong with your mortgage application, what your next steps should be and how to improve your chances of being accepted.
Why Was My Mortgage Application Rejected?
If your mortgage application was rejected, it means you do not meet the lending company’s requirements.
Your mortgage application is compared to the lender’s (the bank or building society’s) set of criteria for approving borrowers. If your mortgage application is turned down, it means you didn’t check any of the boxes. Every lender tests applications in their own way. One lender may require three months of bank statements, while another may only need one month. Some lenders won’t lend if you’ve only worked at your current job for a year, while others would.
As a result, a mortgage failure is not the end of the path. All you have to do now is locate a lender who fits your requirements. This is why using a mortgage broker can be beneficial since they are familiar with all of the lender’s requirements and would be able to match you with the mortgage company that is most likely to consider your unique situation.
What Should You Do If Your Mortgage Application Gets Rejected?
There are a number of reasons why a mortgage application can be turned down. It’s also just a simple error that can be corrected easily, such as a misspelling or incorrect personal details.
It may also be a bigger problem that takes longer to resolve, such as a poor credit rating.
The reasons for being turned down for a mortgage are primarily financial.
The most common reason a mortgage application is turned down is because of your financial condition. It may be as a result of:
Missed or defaulted payments, County Court Judgements (CCJs), and loan applications all appear on your credit report if you have a poor credit history. If you have a bad credit history, lenders will believe you will struggle to repay the loan.
High debt: If you already have a lot of debt, lenders will be reluctant to let you borrow more because you will be unable to afford it.
Low down payment: To get a mortgage, you typically need a deposit of between 5% and 10% of the purchase price. If you have a credit score below this, your mortgage will likely be denied.
Laws of affordability: If a lender believes you won’t be able to afford the payments, your mortgage application will be turned down. Before making a decision, they will review your earnings and expenditures.
Payday loans: Payday loans you’ve taken out could be a factor, depending on the lender. Payday loans are reported to the credit bureaus for six years.
Other factors, aside from your finances, can influence your mortgage application. There are some of them:
Not being registered to vote – Before applying for a mortgage, it’s a good idea to register to vote so that a lender can verify that the information you’ve given is accurate.
Time spent in the United Kingdom: Certain lenders require that you have lived in the United Kingdom for a certain period of time before applying for a mortgage. You will need to display proof of this for a visa. You’ll still need a bank account in the United Kingdom.
Jobs who are self-employed or hired on a contract basis – Lenders may view self-employment as a riskier investment. If you are self-employed, you will need to demonstrate that you have a stable income and a career you can count on in the future. This can be done for tax returns and financial statements.
If Your Mortgage Application Is Rejected – What Should You Do?
We always recommend using a mortgage broker at propertyhelp.uk. This is particularly true if your mortgage application was turned down. Brokers are familiar with the industry and the lending conditions that each company has. As a result, they will be able to match you with the best lender for your needs.
A broker will also assist you in evaluating your previous application and determining what went wrong.
In practice, a mortgage arrangement was rejected.
A mortgage arrangement, in theory, is a lender’s provisional judgment. They take some simple details and run a credit check before determining a number that they might ‘in theory’ lend.
If you are turned down at this stage, it does not mean you will not be approved by another lender later. However, before you submit another application, you can determine why you were denied the first time. This should be something the lender will tell you.
When you know, you can either focus on resolving the issues or seek assistance from a mortgage broker in seeking a lender who will accept you.
Despite an understanding in principle, the mortgage was turned down.
Obtaining a mortgage agreement, in theory, does not imply that you will be approved for a loan. Suppose you cannot get a mortgage after receiving an agreement in principle. In that case, it means the lender noticed something that didn’t meet their lending requirements during a comprehensive examination of your records.
If this occurs, request an explanation from the lender as to why you were turned down. Until applying elsewhere, strive to resolve the issues. You can also talk to a mortgage broker to see if they can assist you in making a good application elsewhere.
The underwriter turned down the loan.
Your application is sent to an underwriting team until a mortgage broker approves you and lends you the money to buy a home. This is where they decide how risky you are and whether you are worth taking on the risk.
You may be turned down for a variety of reasons, including:
They noticed something about your credit history. If you wanted to hide a CCJ that has now been discovered, for example, you would have failed their affordability estimates.
There’s something on your application form that I don’t understand. If information is missing from your application, for example, you can be refused.
Unacceptable records have been given.
The amount of money you’ve put up to fund your application isn’t enough. This could happen if your lender, for example, does not recognize commission as revenue.
The justification for the mortgage is unacceptable.
They can’t take you because you’re too dangerous.
If you are turned down, you can appeal the decision, but underwriters seldom change their minds. Your best bet is to seek advice from a professional. A mortgage broker will help you determine what went wrong, whether an appeal is worthwhile, and whether you can apply to a different lender.
My Mortgage Was Turned Down Due To Lack of Affordability.
If your mortgage application is turned down due to affordability issues, that doesn’t necessarily mean you can’t handle the payments. Each lender has its own set of rules for what income they will include in their estimates and exclude. For example, if your work requires extra bonus payments on top of your basic salary, some lenders will allow you to include this, while others might only allow you to factor in half of it, and others will not factor it in at all.
If you have many income sources, are self-employed, or your income simply does not suit the “standard,” you should contact a mortgage broker. A broker will be be able to tell you which lenders will take your money.
After a valuation, the underwriter rejected the mortgage application.
Your lender will perform their own appraisal of the property you intend to purchase as part of the mortgage application process. Your application could be denied as a result of this.
If the surveyor has undervalued the land, this may happen. Or they are worried about its suitability as loan protection. The latter may be due to the fact that the building materials do not comply with the lending agreement or that it needs substantial repairs.
Down-valuations are a more serious issue. It can be difficult to argue against their value unless there are real comparable assets that justify the price you are paying. A lower valuation means they’ll lend less money, which might make the home you want to purchase unaffordable.
Determine what went wrong
You are unlikely to get another mortgage if it was due to something you failed to mention on your original application. Suppose you tried to cover a bankruptcy or presented misleading details, for example.
If it’s due to some reversible cause – such as a shift in your financial condition – you’ll need to find a new mortgage quickly. A mortgage broker would be invaluable in this situation because they will assist you in locating the most likely lender to accept you. They can also assist you with submitting a new application.
Before completion, the mortgage offer expires.
Many mortgage deals are only good for six months. If your purchase takes longer than that to complete, you will need to reapply for your mortgage. If you’re buying a new home, where construction delays can cause a mortgage headache, this is extremely unlikely. Learn more by reading our guides on the new build conveyancing method and buying off the schedule.
Is it true that being turned down for a mortgage affects my credit score?
Your credit score will not be affected if your mortgage application is rejected. However, the fact that a mortgage lender performed a search would appear on your credit report, but not the outcome. This quest, regarded as a ‘hard search,’ would be seen by other lenders. Multiple hard searches would affect your credit score. It gives the impression that there is an issue and that other lenders will turn you down.
Taking the time before applying for a mortgage is one way to stop this. Find the lender who is most likely to approve your application, check your credit score, and use a mortgage broker.
Can You Get A Mortgage With Poor Credit?
Mortgage denial does not have to be the product of a weak credit history. There are mortgages specifically tailored for people with bad credit and simple measures you can take to increase the chances of getting accepted.
Even if you have a bad credit background, getting a mortgage is not impossible. Some lenders have special products for people who have been turned down for conventional loans. However, before you select one of these items, there are measures you can take to increase your chances of being accepted for a more affordable traditional loan.
The first step is to come to a complete stop. A string of failed mortgage applications will wreak havoc on your already blemished credit history and lower your chances of ever being accepted.
Examine your credit report to look for any flaws or inaccuracies. Then follow the steps outlined below to boost your credit score.
Make a larger deposit. The smaller your mortgage and loan-to-value ratio, the lower your risk, and therefore the more likely you are to be accepted.
Consider meeting with a mortgage broker once you believe your credit rating is at its best. They’ll know which lenders are most likely to accept someone in your situation, and they’ll be able to assist you in locating and arranging a mortgage.
What are poor credit mortgages, and how do you get one?
You will still be able to get a home loan if your credit history prevents you from being eligible for advertised mortgages.
Some lenders specialize in mortgages for individuals with poor credit histories. Since you are a higher risk, they usually charge higher interest rates and fees.
You will also be forced to put down a greater deposit than you would on a traditional loan. Mortgages for people with bad credit typically require a 15% down payment.
Taking out a bad credit mortgage and making on-time payments will help you fix your credit history so that you can remortgage to a more affordable mainstream home loan in a few years.
How can a person with bad credit get a mortgage?
Multiple mortgage applications denied will wreak havoc on your already blemished credit score. If you know, you’ll have trouble having a mortgage. The first step should be to talk to your bank. Tell them about your situation and ask if they have any items that would be ideal for you.
If they are unable to assist you, contact a mortgage broker. Their business experience would be invaluable since they would know which lenders are more willing to approve the application, and certain poor credit mortgages are only available via a broker.
A broker will assist you in selecting the right mortgage for your needs, ensuring that you get the best rate possible.