The stages that your mortgage application can be declined


Hearing that your mortgage application has been declined is frustrating and upsetting but this doesn’t mean you can’t still secure a mortgage. Each lender has its own criteria — whilst you may not be the right fit for one lender, you may suit the lending criteria of another. There are numerous reasons why your application may have been refused and there are steps you can take to try and resolve the issue before reapplying for a mortgage.

There are various stages throughout the process when your application can be rejected and we’ll detail them here for you. Should you find yourself in this position, it’s best to speak to a mortgage broker for help on how to proceed.

You have been refused a mortgage in principle

A mortgage in principle is a conditional offer from the lender. It confirms the amount they are prepared to lend you ‘in principle’. To arrive at this figure, the lender checks your basic information and carries out a credit check. If you are declined at this stage, ask the lender why.

It could be because you haven’t passed the credit check. Your credit score may be good with one credit reference agency but the lender may have carried out the check via a different one. Alternatively, your credit score may be too low in general but there are ways you can improve it. Another reason may be that the lender feels you have an insufficient history of employment. As lenders have different criteria, you may be able to get a mortgage in principle elsewhere. However, it’s important to find out why were you were rejected first.

Your mortgage is declined after you have received a mortgage in principle

Receiving a mortgage in principle lets you know what the lender is conditionally prepared to lend you. However, it isn’t a guarantee of being offered a mortgage. If you are rejected at this stage, it’s usually because an in-depth check of your information has revealed that you don’t fully meet the lender’s criteria. Ask the lender why your application has been declined so that you can address the issue.

The underwriter has declined your mortgage

The lender’s underwriter has to review your application before the lender can agree to offer you a mortgage. There are various reasons why they may refuse your application:

  • There may be information missing from the application form
  • They may not be satisfied with the documentation you have provided
  • You don’t meet their affordability criteria
  • The hard search on your credit report may have identified a reason that wasn’t noted on the previous check

Speak with a mortgage broker for help and advice at this stage. Whilst you can appeal, it’s unlikely that the underwriter will alter its decision. You may be able to apply to another lender, though. For example, the underwriter may have rejected you because the income amount you submitted included commission. Some lenders don’t acknowledge commission payments as part of your income. Others accept a percentage of it and some will consider all of your commission. A mortgage broker will know which lenders to approach for your situation.

Your mortgage is declined after the property valuation

The lender will instruct a surveyor to carry out a valuation on the property. This is to ensure that the property is acceptable for a mortgage and has been priced correctly. If your mortgage is declined after the valuation has been done, it means the surveyor has flagged up an issue.

The property may not be suitable for mortgage purposes. For example, the property in Bexleyheath might need a considerable amount of repairs to be carried out. Or it might be constructed with unsuitable materials. If repairs are needed, you can obtain quotes and try to renegotiate the price with the seller. If the construction materials don’t fit the lender’s requirements, a mortgage broker will be able to advise you on other lenders who may be willing to lend on that basis.

The surveyor may have down-valued the property. This could be because the seller has overpriced it, the surveyor has discovered structural defects or due to the market conditions. You can contact the seller to try to renegotiate the price. If the seller refuses to lower the price, you need to think carefully about whether to increase your deposit to be able to afford it. Depending on how much it was down-valued by, this could be very expensive.

Your mortgage is denied after exchange of contracts

It’s not very common to have a mortgage declined after exchanging contracts but it can still happen. Having your mortgage refused at this stage can be extremely costly as you stand to lose your deposit.

One possible reason may be that you failed to report information on your mortgage application, such as bankruptcy. In this situation, it’s unlikely that you can do anything about it and will have no option but to accept your losses. That’s why it’s vital to ensure that your application is accurate before it’s submitted.

Another reason may be that your financial situation has changed since you submitted your mortgage application. For example, a change in your employment. In this case, try to secure a new mortgage as quickly as possible as you’re legally bound to buy the property. A mortgage broker can assist you with this by locating a lender who will approve you and then by processing your application quickly.

Your mortgage offer lapses before completion

As mortgage offers usually last for 6 months, it’s rare for one to expire before completion. If this does happen, you will need to reapply for the same mortgage. This scenario only tends to happen with new-builds that are affected by delays with the building works. If you think this is going to happen, you can plan ahead and ask the lender to extend your mortgage offer.

A mortgage broker can help you at any stage of the process

Before you apply to a lender for a mortgage, there are various steps you can take to improve your chances of success. You can also use the services of a mortgage broker in Kent, London or Edinburgh to check your application and ensure that it has been prepared correctly. Having assessed your situation and with extensive knowledge of the mortgage market, your broker can then present your application to the lender most likely to approve it.

If you’ve already applied for Welling or Pimlico mortgages and have been rejected, contact a mortgage broker as quickly as possible. A mortgage expert can help you find out why your application was refused, advise you on what to do about it and find a lender more likely to accept you.

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