Mortgage declined, now what?
Being declined for a mortgage isn’t necessarily the end of your story and it’s well worth looking into the circumstances around the decision to decline you to see if there’s anyway to change that to a more positive outcome from a future application.
Your best chance of successfully changing a mortgage decision from a negative to a positive comes when you talk to a team of experts, who have vast experience with these scenarios.
There are a number of things we’ll look at with you to understand first how the decision to decline a mortgage was reached and then secondly to determine if anything could be done differently with a new mortgage application, perhaps with a different lender for whom you more closely match the criteria.
Why have I been refused a mortgage?
When you apply for a mortgage, the lender will assess your application according to their criteria. To do this, they’ll look at information on your credit report, your application form and anything they have in support of your mortgage application. This helps them decide if you’re able and likely to meet the repayments. It’s worth noting that mortgage providers usually check that you can afford not only the deal you’re applying for, but also higher repayments in case interest rates go up.
Will a different lender still refuse me a mortgage if I’ve already been declined?
Each lender has their own criteria, so there might be some things that would cause your application to be declined by one, but not by another. This is where our team of experts will get involved and help determine if a different lender is a better match to your circumstances.
What are the most common reasons for being declined a mortgage?
- You’ve missed payments or made late payments recently – as in within the last twelve months
- You’ve had a default or a CCJ listed against you within the last six years
- You’ve had a bankruptcy listed against you within the last seven years
- You’ve made too many credit applications in a short space of time, usually within a six or twelve month period, resulting in multiple hard searches being recorded on your report and thus lowering your credit score until a certain time has passed
- You’re not registered to vote on the electoral roll (this is used for proof of your address and identity and without being on the electoral roll you are more at risk of being declined)
- You have a limited history on your credit file to have been able to build up a score
- The lender has calculated you won’t be able to make the repayments – as in, you’ve applied for something that is outside your level of affordability
- You’re self-employed, or are a contract worker, and haven’t provided enough proof that you have consistent income
- There are mistakes such as incorrect addresses, or other errors on your application form
- You may not fall into the target bracket for the type of mortgage you’ve applied for
- The lender you have applied with, uses a scoring system and your score is less than their lower level. This is as opposed to using a lender that takes a common sense approach to lending and won’t just decline an application because you didn’t reach their minimum score
Why was my Mortgage declined after an Agreement in Principle?
An ‘Agreement in Principle’, sometimes referred to as a ‘Decision in Principle’, is given by lenders to say that, based on primary information about you, they believe they would give you a mortgage if you applied for one. It can be useful to have an agreement in principle when you’re house-hunting, as it gives you an idea of what you can afford and some housing agents will check you have one before letting you view a property. But it doesn’t guarantee you a mortgage and it is possible to be refused by a mortgage provider after they’ve given you an agreement in principle.
If this happens, it’s often because the lender found something that didn’t meet their criteria when they did a full search of your information, whether that’s regarding your credit file or income. It could also be due to the findings from a valuation report of the property, as more often that not, an agreement in principle is not for a specific property.
You may be able to find out what it is by asking the lender. You may also find it helpful to use a mortgage broker, like ourselves, who’ll be able to assess your financial and credit information and find a mortgage that’s likely to fit. The way we work at Right Mortgage is by completing as much initial research upfront as possible, to reduce the likelihood of a mortgage being declined.
Does being declined a mortgage affect my credit score and make it even worse?
Being refused for credit won’t, in itself, hurt your credit score. Your credit report will show that you applied for a mortgage, but it won’t show whether you were accepted.
However, being refused a mortgage can lead to more attempts to get one and each application will leave a hard search on your report. Multiple hard searches can lower your score and reduce your chances of acceptance until a certain amount of time has passed and the clock ‘resets’ on the searches conducted against you.
What should I do after I’ve been refused a mortgage?
Seek professional advice, such as speaking to one of our advisers. We may be better placed to help you, rather than you trying to figure it out on your own.
Once we’ve been able to identify the problem, we may ask you to make a new application and we’ll focus together on giving yourself the best chance of getting approved next time around, by trying to address the potential reasons you were refused, and working on convincing lenders that you’re ready for a mortgage.
What’s the first thing I should do after being refused a mortgage?
If you haven’t already, ask the lender why your application was declined. They might not give you answer, but it’s worth a try.
Next, ask an expert – like us – to assess your circumstances.
Other things to consider include:-
- Look at your credit history and see if there’s anything obvious there that can be rectified.
- Make yourself attractive to lenders – be prepared to wait six to twelve months for a second application after you’ve rectified any problems on your credit report, so that you can prove the problems are in the past and show a recent pattern of good payment / financial management)
- Mortgage providers need to know that you’ll be a reliable and responsible borrower. You can show them this by paying your regular payments (e.g. for credit cards, mobile phone contracts, and utility bills) on time and in full. You could also consider paying off existing debt if you can, and lowering your credit utilisation – this is the percentage you use of your available credit, and it typically helps your credit score to use no more than 25%.
- If you were declined a mortgage because the lender didn’t think you could afford the repayments, see what you can do to spread your money further – either by increasing the amount you earn each month or decreasing your living costs. You could also try to lower the amount you need to borrow by increasing your deposit – for example, you could plan how to save more, or use one of the Government’s Help to Buy schemes such as shared ownership, equity loan or ISA.
- Making mistakes on your application form can be a key stumbling block, which is why using a mortgage adviser to do this for you, really is a benefit of getting an application right.
Can I still get a mortgage with a history of bad credit?
Getting a mortgage with a bad credit history is possible, but you may need a larger deposit, as lenders may see you as more of a risk. Talk to us early in the process to get the benefit of our advice so that you follow the right path from the outset.