Last Updated on 1st November 2020
Having a mortgage declined can be frustrating and it usually leads to worry and panic. Our advisors will be the first to tell you not to worry, as we deal with a large number of enquiries relating to rejected mortgages. We’ve put this guide together to explain everything you need to know about mortgage applications that have been declined.
I’ve been declined a mortgage HELP!
Mortgages can be rejected. Just because you’ve been declined a mortgage once, it doesn’t mean that it’s impossible. Our expert advisors have helped many borrowers get a mortgage, even if they’ve been declined by their own bank or by a different mortgage broker.
The most common reasons mortgages can be declined are:
- Adverse credit
- Low credit score
- Income is too low
- Affordability (loan applied for is too high)
- Little evidence of income (recently self-employed)
- The property does not meet lender requirements
- Discrepancies with the underwriter
- The correct lender is not approached from the outset
There are many other reasons why mortgages aren’t approved. Our advisors are specialist mortgage brokers. They specialise in ‘tricky’ mortgages and love difficult cases. This is what makes them expert mortgage advisors. Where a standard broker or high street bank may say no, our advisors won’t (unless it really is impossible).
They can also help you irrespective of your location, allowing you to apply for your mortgage online. An online mortgage application can save you time, especially when you already have a busy schedule. This is because everything is done online so you don’t have to squeeze in unnecessary meetings with us.
Even if a mortgage may not be possible now, we can inform you of what to do and when to apply again. If your circumstances mean that there’s no possible way you’ll get a mortgage, we won’t waste your time and apply for a mortgage. We can inform you of the necessary steps that you’ll need to take before applying.
Why was my mortgage rejected?
It’s important to establish why your mortgage wasn’t approved and at what stage. This will give us an idea as to what went wrong and why. More importantly, it provides us with information that we can use to getting your mortgage back on track. For instance, you may have been declined at the initial stage of getting an agreement in principle. On the other hand, you may have been declined a mortgage offer due to the property itself.
The stages at which mortgages can be declined are:
- Mortgage not applied for (bank or broker has told you that you won’t qualify)
- Decision in principle declined
- Refused after a decision in principle is approved
- Mortgage declined by the underwriter
- Refused due to mortgage survey on the property
- Mortgage declined at the very end of the purchase
Irrespective of the reasons you’ve been declined, the ultimate reason is that the lender wasn’t satisfied with your application. Lenders all vary in their mortgage assessments. Just because one lender has declined you, it doesn’t mean that they all will. Once a specialist advisor has your information, they’ll have an understanding of which lenders to approach and the lenders to avoid.
I didn’t apply, I was just told I wouldn’t get a mortgage
If you’ve approached a high street lender, then it isn’t uncommon to be simply ‘told’ that you won’t get a mortgage. It also isn’t uncommon for high street brokers to process your application, knowing that it’s going to be declined. This is especially true for when borrowers have unique circumstances, such as having adverse credit or being self-employed with little account history.
If you’ve been told that you won’t get a mortgage, then do make an enquiry with us. A specialist will assess your circumstances and will ultimately explain what’s possible and what isn’t. If a mortgage isn’t possible, there may be other alternatives to finance your property purchase. We’ll also explain what you can do next so that you can prepare yourself better before approaching lenders.
Knowledge is power. That phrase couldn’t be truer when it comes to mortgages. The difference between an average broker and an expert mortgage advisor is simply the knowledge and experience our advisors have. If there’s a lender out there for you, we’ll find them! We’ll also find you the best possible deal you can qualify for.
Decision in principle declined, what should I do?
If you haven’t been approved an agreement in principle, then you should ask for the reasons why. Each lender has a unique assessment which is typically led by a scoring system. If you’ve been declined at this stage, it’s probably because you didn’t score highly enough on their assessment.
At the initial stage of applying for an AIP, the following is taken into consideration:
- Your credit score
- Adverse credit issues
- Loan to value (LTV)
- Deposit amount
- Deposit type (savings, gifted deposit)
- Electoral roll registration/address history
There are other variables that lenders may consider when looking at whether or not to approve you an AIP. If you’ve not passed the initial checks, certainly don’t give up. A specialist can look at your case and the lender you’ve applied with to try and establish the stumbling block and how to get over it.
Our advisors also have access to specialist lenders that offer a more flexible approach. Specialist lenders tend not to use an automated system and look at cases individually to establish whether or not an AIP can be issued.
I’ve been declined after being approved an AIP
Being declined after you’ve been given an AIP can be extremely frustrating. This generally happens when the information provided to the lender doesn’t match up with their assessment. This can happen for various reasons, such as misinformation or applying to an unsuitable lender. For instance, a lender may look at your credit report in more detail and pick up issues that may have been undisclosed or not found on initial checks.
Non-disclosure is taken very seriously by lenders and it’s usually enough for them to simply pull the plug. This may not even be your fault. Sometimes brokers can apply to an unsuitable lender and simply wish for the best. This is bad practice and isn’t something our advisors ever do. Our advisors will always retrieve your full profile before approaching lenders. This is so that they’re able to approach only suitable lenders based on your circumstances.
Using payday loans is another common reason why lenders withdraw or you may have recently started a new job. Irrespective of the reasons you’ve been refused, there will be certain lenders better suited than others. Always disclose your full information including any adverse credit issues. You can download a copy of your credit reports online to see what issues lenders may find.
Reputable mortgage brokers should be asking you the right questions and informing you of the steps to take. There are lenders available that will consider issues such as defaults, CCJs, IVAs, late payments and even bankruptcy. Once disclosed, we can get to work by assessing any adverse issues and approach suitable lenders accordingly.
Mortgage declined by the underwriter
Having a mortgage rejected at the stage of underwriting can be extremely frustrating. That being said, a specialist advisor can usually rescue an application at this stage. This is because your mortgage has passed the first stage and you have an agreement in principle. The underwriter has then found something that they’re not satisfied with. If an underwriter has identified a problem, it can simply be a matter of speaking to the underwriter about what the issues may be. Mortgage brokers will do this on your behalf.
Why underwriters may refuse a mortgage
The main reasons why underwriters reject applications are:
- Undisclosed adverse credit issues
- Proof of income not satisfactory or too low
- Incorrect or conflicting documents supplied
- Discrepancies on your application form
- Mortgage not viable
- Underwriter deems you to be high risk
As each lender varies in their approval methods, the respective underwriters also vary in how they assess each case. Underwriters are restricted to guidelines that they must follow. More than often, underwriters may come across something in your application that they’re unsure about or doesn’t make sense to them. If there’s nobody on the other end to inform them otherwise, then your application can get rejected. If there is someone on the other end, such as a broker, then this can be the difference in being declined or approved.
Take a look at the example below.
A borrower may be applying for a mortgage and the income earned comfortably meets the affordability. The underwriter finds a satisfied CCJ from three years ago. The lender that you’ve applied to doesn’t accept anyone with a CCJ, even though you can afford to pay the mortgage. This would more than likely be declined because it doesn’t meet that specific lender’s requirements.
For the reasons above, it’s vital to approach the right lender from the outset. If an underwriter declines your mortgage, then it can be very difficult to overturn their decision. Our advisors always ensure an application is presented in the best way to the most suitable lender. If underwriters raise concerns, we can provide the relevant information needed to get the mortgage approved. You can make an enquiry at any time and a specialist will call you back.
Declined a mortgage after the property survey
Lenders will carry out a mortgage survey of the property you wish to purchase. Lenders will do this to check that the property they’re lending on meets their requirements. The last thing a lender wants to do is to lend on a property that’s about to fall down.
A lender may decline a mortgage because the property doesn’t meet their criteria. The build material may not be suitable or they feel the property needs significant works before it can be lived in. If the lender has declined your mortgage because of the condition or construction type, then there may be alternative lenders that would be willing to lend.
On the other hand, a mortgage survey may result in the surveyor down-valuing the property. You may have agreed on a purchase price of £100,000, but the surveyor only values the property at £90,000. This can result in you having to find the extra £10,000, in addition to your own deposit! This is because it’s extremely rare for a mortgage surveyor to increase their valuation. This can have a considerable effect on the mortgage amount offered.
I’ve been declined at the very end of my purchase
Having a mortgage declined at the very end is rare, but it is possible. Something may have been flagged up, causing the lender to pull the mortgage completely. There are a number of reasons that may cause red flags for lenders and unfortunately, this can happen at any time.
If you’ve had a lender retract their mortgage offer last minute, then do make an enquiry as soon as possible. Our advisors can look into the case for you to establish what went wrong and why. We can then look at alternative lenders that would be happy to lend based on your criteria.
My mortgage has been refused due to bad credit
Having adverse-credit is something that you need to disclose when applying for a mortgage. The more upfront you are with your credit issues, the more an advisor can help you. This is because they can approach lenders that will be suitable, based on your circumstances.
Our advisors specialise in mortgages with bad credit and can help those with:
- Debt management plans
- Late payments and arrears
There are specialist lenders that do specialise in mortgages for borrowers with bad credit. That said, a mainstream lender may approve you a mortgage if your application is packaged the right way. It all depends on how severe and recent your credit issues are. As each case is different, you can consult an expert at any time.
Declined a mortgage because of income/affordability
Income is assessed in different ways by lenders (as is everything). ‘Lender A’ may use an average spread across varied income amounts, whereas ‘Lender B’ will use your latest income figures. ‘Lender C’ may only assess income from contractual employment in comparison to ‘Lender D’ that is more suitable for someone who has become recently self-employed.
If the bulk of your salary comes from overtime or bonuses, then it makes sense to use a lender that will make assessments on the additional income you’re earning and not just your salaried income.
Affordability is no different. Again, lenders vary in how they assess your mortgage affordability. One lender may be more risk-averse and be willing to provide you with a higher loan in comparison with a different lender who is only prepared to lend you a fraction of what you need. In addition, lenders generally lend up to 4x your income. Other lenders may only lend up to 3x your annual income, with another lending at 5x or even 6x!
Some lenders will also delve into your outgoings to see if the loan you’ve applied for is ‘affordable’. Furthermore, the income figures that lenders use to make the assessment on can also vary, as we’ve explained above.
It’s near enough impossible for you to find the right lender, without knowing their criteria and what they will and won’t accept. Experienced mortgage brokers understand each lender’s criteria as they speak to lenders on a daily basis. Knowing where to place your mortgage should be second nature to the most experienced of mortgage brokers.
I’m self-employed and struggling to get a mortgage
Getting a mortgage whilst being self-employed has become restricted over the years. Self-cert mortgages are extinct and as a result, the majority of mainstream lenders have also become restricted in their outlook towards self-employed borrowers. That said, there are still numerous lenders that will consider self-employed borrowers, especially if you have accounts and trading history that span over a number of years.
If you’ve recently become self-employed or changed your business structure, then things can become more difficult. There are specialist lenders who cater for self-employed borrowers with unique circumstances such as:
- Accounts showing a recent loss
- Recently self-employed
- Recent changes in company structure
- Lending based on retained profits and dividends (ltd companies)
- Declining profits
- Self-employed with adverse credit
Using a specialist mortgage broker
If you’re still unsure of what to do, you can make an enquiry. A specialist will call you to see exactly what went wrong and the reasons why you were declined. Even if you’re not sure why your mortgage was rejected, our specialists can usually spot the gaps in your application. We’ll then provide you with a solution on how to overturn a refused mortgage.