A decline is not the end of the road. Here are the common reasons a mortgage application is refused, what you can do about each, and how a broker can give your next application the best chance.
Whether you are moving, buying your first home or adding an investment property, buying can be a stressful process. Perhaps you have had an offer accepted, started the legal work and are looking forward to picking up the keys, then you get an email saying your mortgage has been declined.
Situations like this can make you wonder what to do next, and whether the whole purchase is now at risk. The first thing to do is not panic. There are many reasons a mortgage application can be declined, and it does not have to mean the end of the road.
When you use a broker, a significant amount of due diligence is carried out before a mortgage illustration or agreement in principle is provided. We do this to make sure we recommend not just the right product, but the most suitable one based on your circumstances. That last part is the key: based on your circumstances.
So let's look at the various things that could lead to an application being declined. It is worth highlighting the word could, as these do not always cause a problem.
Not being registered to vote can make it harder to get a mortgage, because it makes it harder for lenders to confirm your identity and where you live. We always recommend making sure you are registered on the electoral roll at your current address before you apply.
Your credit rating affects both the cost of your mortgage and whether lenders are willing to lend at all. If you have a poor credit rating you may find it harder to get a mortgage. You can check your score for free with services such as Credit Karma, Equifax and Experian.
Be aware that having no credit history can also be a problem. It is wise to hold some form of credit, such as a credit card or even a mobile phone contract managed well, to help build a track record that supports your application.
One of the more common reasons an application is declined is simply that the income is not high enough for the lender to provide the loan requested, or the deposit is too small to bridge the gap. There are a number of specialist schemes, particularly for first-time buyers, that may help in this situation, and we would generally explore these as part of our initial advice. Our guide to how much you can borrow explains how lenders assess affordability.
If you have lived in the UK for under three years you may find it harder to get a mortgage. We say harder rather than impossible, this is exactly the kind of situation where speaking to a broker pays off, as we can identify the lenders most likely to consider your circumstances.
By errors we mean not just typos and spelling mistakes, but inconsistencies, names, dates and other details that do not match up. Lenders can also make mistakes themselves, which is another reason to use an experienced broker who can check everything thoroughly and correct anything before it causes a problem.
Avoid firing off multiple applications after a decline. Each one can leave a mark on your credit file and make the next lender more cautious. It is far better to understand why you were declined first, then make one well-placed application to the right lender.
If you are looking to obtain a mortgage, we always recommend choosing an experienced and reliable broker who can give your application the highest chance of success. Our team is here to answer any questions you may have.
Speak to an adviser who will review what went wrong and identify a lender whose criteria fit your circumstances, so your next application has the best possible chance.