Why can mortgages be declined?
There are a wide range of reasons why you could have your mortgage application declined, most of which relate to your income level and/or your credit score. One of the first things you should do before you apply for a mortgage is to check your credit report. Below are some of the more common reasons you may be refused a mortgage.
Poor credit history
If you have a history of bad credit then mortgage lenders will be cautious when it comes to offering you a mortgage. Different lenders have different acceptance criteria, so some will be willing to accept minor credit issues, but those with severe debt problems are likely to struggle to find a lender. If your credit report shows any of the following, you can be turned down for a mortgage:
- You’ve missed or made late payments on bills and accounts recently
- You’ve had a default or a CCJ (County Court Judgement) in the past six years
- You’ve made a number of credit applications within the past six months. Multiple hard searches on your credit file will have lowered your credit score
- You’re not registered to vote on the electoral roll. It can be difficult to satisfactorily prove your current address and identity without this
- You’ve taken out payday loans, as this gives the impression that you manage your finances poorly
Insufficient income or stability of income
If Mortgage Lenders decide that you don’t earn enough to cover mortgage repayments easily or they feel that your current source of income, even if it is enough, is unreliable, then you can be turned down for a mortgage. These are some of the common reasons people are declined a mortgage on the grounds of their income.
- The lender has calculated that you can’t afford the repayments based on your monthly income and outgoings
- You’re Self-Employed or a contract worker and can’t prove that you have consistent income
Outside of your financial circumstances, you can also sometimes be refused a mortgage if there are incorrect addresses or other errors on your application form. You also may not fall into the target demographic for the mortgage you’ve applied for, for example, some mortgages have additional criteria such as being within a certain age group or already owning property.
How can I be declined if I had an Agreement in Principle?
It’s important to realise that an Agreement in Principle is not a mortgage offer. Mortgage Lenders usually give them based on your initial basic information, however you will still need to meet their full criteria once you make the full application.
Does being declined affect my credit score?
As hard searches are performed on your credit file each time you make a mortgage application, if you are declined you will need to try again. Whilst your credit file won’t record that you have been declined, a number of applications in a short time will affect your credit score negatively.
What should I do if I have been declined?
Whilst it might feel like common sense to try another lender, it’s important that you bear in mind each application will further reduce your chance of being accepted due to the number of applications on your credit file. A better option is to seek mortgage advice before you make another application.
Find out why you were refused
You can ask the Mortgage lender why you have been declined but they won’t always tell you. You can also check if you fit any of the above suggestions as to why mortgages may be declined.
Work on making yourself more attractive to lenders
There are a number of ways that you can improve your chances of being accepted for a mortgage in the future. These involve improving your credit score and your overall available income and stability. Here are some examples:
- Make sure you’re on the electoral roll at your current address
- Check for any mistakes on your credit file
- Save a larger deposit
- Clear your debt
- Sometimes waiting until you have been employed/Self-Employed for a longer duration helps
How can The Mortgage Brokerage help if you’ve been declined a mortgage?
It can be difficult to know prior to applying for a mortgage what the likelihood is that you will be accepted. Sometimes even the most confident applicants receive a surprising response from lenders. At The Mortgage Brokerage, our authorised and regulated brokers have an intimate knowledge of each lender’s criteria, which means they can match you with those most likely to accept your mortgage application.
As well as giving you better access to competitive deals, this can also help to prevent the upset, expense and credit impact of failed mortgage applications.due to the number of applications on yourc