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Declined for a mortgage


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Declined for a mortgage

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Last reviewed on 4th April 2022

Having your mortgage declined can be frustrating and it usually leads to worry and panic. We’ll be the first to tell you not to worry, as we deal with a large number of enquiries relating to rejected mortgages.

Statistics from several mortgage bodies show that around 10% of all mortgage applications are declined each year. Furthermore, many of the declined applications are due to being placed with lenders that simply weren’t suitable.

We’ve put this guide together to explain everything you need to know about mortgage applications that have been declined.

What should I do if I’ve been declined a mortgage?

Don’t worry! Mortgages can be rejected. Just because you’ve been declined a mortgage once, 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.

Why do lenders decline mortgage applications?

Common reasons for why mortgages are declined include:

  • Bad credit history
  • Low credit score
  • Not enough income
  • Little evidence of income (recently self-employed)
  • Not registered to vote
  • Using payday loans
  • Buying an unsuitable property
  • Discrepancies with the underwriter
  • The application is placed with an unsuitable mortgage lender

If you’ve been declined a mortgage for any of these reasons, you may be accepted by a different lender. Furthermore, making small changes to your application can also have a huge impact.

Bad credit history

Being declined a mortgage because of bad credit is perhaps the most common reason why applications are rejected.

Your credit file informs lenders of how you’ve handled credit. If you have credit issues, then lenders will certainly hesitate to offer you a mortgage. This doesn’t mean to say a mortgage is impossible.

If you’ve been refused a mortgage because of poor credit, you’ll need to check if there are any suitable lenders. It’s likely you’ve been declined simply because the lender you applied with wasn’t suitable.

Having poor credit is something that you’ll 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.

Mortgages can be declined because of the following credit issues:

  • Debt management plans
  • CCJs
  • Defaults
  • Bankruptcy
  • Late payments and arrears
  • IVAs
  • Repossession

There are specialist lenders that do specialise in mortgages for borrowers with bad credit. That said, a mainstream lender may approve a mortgage if your application is packaged the right way.

Learn more about mortgages with poor credit here.

Low credit score

It’s important to note that having a great credit score won’t guarantee you a mortgage, although it can certainly help. If you have a low credit score, then it can make mortgage approval difficult.

If you have a low credit score because you’ve hardly used credit, then you should be able to get a mortgage with a suitable lender. The underwriter will need to be informed of why your credit score is low.

In comparison, if your credit score is low because of credit issues, it will be more difficult to get a mortgage. Nonetheless, a mortgage is possible.

Declined a mortgage because of income

Income is assessed in different ways by lenders. ‘Lender A’ uses an average spread across varied income amounts, whereas ‘Lender B’ will use your latest income figures.

‘Lender C’ only assesses income from contractual employment in comparison to ‘Lender D’ which 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’ll assess your mortgage affordability.

One lender may be willing to provide you with a higher loan in comparison to a different lender who is only prepared to lend you a fraction of what you need. In addition, lenders generally lend up to four times your income. That being said, lenders can lend anywhere from three times and in some cases even five times your annual income.

Some lenders will also delve into your outgoings to see if the loan you’ve applied for is affordable. Use our mortgage affordability calculator to see how much you can borrow.

I’m self-employed and struggling to get a mortgage

Getting a mortgage when 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 toward 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 (limited companies)
  • Declining profits
  • Self-employed with adverse credit

Not registered to vote

Being on the electoral register has many advantages. One advantage is that it can help your mortgage application. This is because once you’re registered to vote, lenders can confirm your address in addition to who you are. In other words, being registered to vote gives your application more credibility.

You can register to vote here.

Refused because of payday loans

Using payday loans is another common reason why lenders decline mortgage applications. This is because the use of payday loans is typically a sign of a financial struggle. That being said, this isn’t always the case.

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 credit issues to approach possible lenders.

Read more: Can I get a mortgage after payday loans?

ask a mortgage broker

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 get 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 due to the property itself.

The stages at which mortgages can be declined are:

  1. Mortgage not applied for (bank or broker has told you that you won’t qualify)
  2. A decision in principle declined
  3. Refused after a decision in principle is approved
  4. Mortgage declined by the underwriter
  5. Refused due to a mortgage survey on the property
  6. 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, we’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 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.

What should I do if my agreement in principle was declined?

If you haven’t been approved of 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
  • Income/affordability

There are other variables that lenders may consider when deciding whether or not to approve a mortgage in principle. If you’ve not passed the initial checks, certainly don’t give up.

A specialist can assess your case to try and establish the issue and how to solve it. 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 a mortgage in principle

Being declined after being approved for a mortgage in principle 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 with an unsuitable lender. For instance, a lender may investigate 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 with unsuitable lenders and simply wish for the best. This is bad practice and isn’t something our advisors ever do.

Mortgage advisors should always retrieve your full profile before approaching lenders. This is so that we’re able to approach lenders that are very likely to say yes. Irrespective of the reasons you’ve been refused, there will be certain lenders better suited than others.

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 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 between 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 with doesn’t accept anyone with a CCJ, even though you can afford to repay 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 crucial to approach the right lender from the start. If an underwriter declines your mortgage, then it can be very difficult to overturn their decision.

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 you’re buying 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 its criteria. The build material may not be suitable or needs significant work 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 can cause doubt 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.

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.


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About the author

Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.