When you’re buying a home, you no doubt are hoping for an easy ride. If you’re a first-time buyer, all the new lingo can seem like a minefield and the whole process involves understanding. One of the main stages is getting a mortgage approved, but unfortunately not everyone will get the result they want and their mortgage application can get declined.
If you’ve had a mortgage application fail, it’s not the end of the road. It doesn’t mean you can never buy a house. In this guide we look at reasons why you could have been refused a mortgage, and what to do if this has happened.
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Factors commonly causing refusal of mortgages
There are a few common reasons for mortgage approvals to be declined, and below we list a few:
- Credit history – if you have a poor credit history, you will struggle to get mortgages with better results. You can work on improving your credit rating or apply for a mortgage which accepts poorer levels
- Vote to register – lenders of course need to confirm your identity, and part of this involves checking if you’re registered to vote. If not, you may struggle to get a mortgage from some lenders. The best way to combat this is to register right away
- Debt – if you have lots of debt, you’re a less secure person to lend a mortgage to. Therefore, pay as much of your debt off as you can before applying
- Credit applications – if you’ve applied to too many places for a loan, it can indicate you have a debt problem
- Affordability – a mortgage doesn’t just involve the deposit, you also need to be able to afford the monthly repayments. If the lender calculates that you can’t afford them, they will reject your application
- Self-employed – if you’re self-employed you may find it harder to get accepted for a mortgage. Look for a lender who offers self-employed mortgages instead
- Small deposit – you need to meet a loan-to-value ratio for mortgages, and these vary. If your down payment on a property is too small compared to the value of the property, you won’t be able to get certain mortgages
- Mistakes – there could be a mistake on your credit report as errors do happen. Check with some major credit checking agencies to check for errors and correct them
Having a mortgage in principle but getting the actual mortgage declined
Unfortunately, just because you have a mortgage in principle it doesn’t mean that you will be approved for the mortgage. This may happen when the lender finds something which leads to a rejection.
If this has happened to you, contact the lender and ask why. Whatever the problem is, try and correct it before you apply to a different mortgage lender. It can be worth utilising the help of a mortgage advisor who can increase your chances of success.
Having a mortgage declined due to affordability
You may have calculated the monthly repayments on a mortgage and decided you can afford it. However, it depends on how well you can afford it as to how likely you are to be accepted.
Each lender will have a different rule for calculating affordability, and if they deem that you may struggle to make the repayments, they won’t approve your application.
It’s worth speaking to a mortgage advisor for advice on the best lenders to approach for your financial and employment situation.
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I began writing for Property Press Online in October 2019. Particular areas of interest are housing market news and new developments in the market.