Declined Mortgages

Why can you be refused a mortgage?

Mortgage lenders each have their own set of lending criteria for each type of mortgage they offer, so you’ll typically need to meet all of the criteria associated with the mortgage you’re applying for in order to qualify.

As criteria can vary widely, it’s perfectly possible to not meet the criteria of one lender and get turned down, but fully qualify for another. That said, some of the more common reasons for mortgage applications are rejected are:

You’ve missed or made late payments recently

Not all lenders view missed payments as a serious credit issue, and there are usually degrees of flexibility around this depending on how recently payments were missed, how many, and for what.

There are even a few high street lenders who are often willing to overlook a couple of minor infractions, especially where the amounts are small, have since been repaid, or are for non-priority bills, such as mobile phones or credit cards.

If you miss payments on secured loans or anything relating to a mortgage, you have a large number of missed payments, or they are of significant value, you will qualify with fewer lenders and are likely to need to focus on Bad Credit lenders.

You’ve had a default or a CCJ in the past six years

If you’ve had a CCJ in the past six years many of the high street lenders will be out of reach, although some are willing to look at applicants that have CCJs as recent as six months ago, so long as they have been satisfied (repaid).

You have taken out payday loans

Although there are a number of lenders in the Bad Credit lending space, it can be difficult to qualify for a mortgage even with specialist lenders if the reason for your debt is payday loans. You will need to work with a specialist broker to overcome this issue.

You’ve made too many credit applications in a short space of time in the past six months

One of the main reasons that it’s advisable to use a mortgage broker if you have a poor credit history is because they can prevent you from applying with multiple lenders that are unlikely to approve your application. Mortgage Lenders tend to do hard searches on your credit file, and these leave a mark, showing future lenders that you have made an application recently. The fact that you are making the same application with another lender will highlight the fact that you were refused the last time.

Multiple hard searches being recorded on your credit file, regardless of if this is for mortgages or other forms of credit, will provide a picture of financial desperation to lenders, making them less comfortable taking on the risk of a large loan such as a mortgage.  It’s a good idea to put off other credit applications for at least six months prior to your mortgage application.

You’re not registered to vote on the electoral roll

Lenders often look to your credit score to aid in their lending decision, and whilst it’s not a particular credit score that they are looking for, low scores can often be a concern, especially for high street lenders.

One of the easiest ways to improve your credit score is to ensure that you’re registered on the electoral roll at your current address. Lenders also use this towards your proof of address, so if you’re not on the electoral roll, it can reduce the number of lenders available to you.

The lender has calculated you won’t be able to make the repayments based on your monthly income/outgoings

Affordability criteria is the most important metric for residential mortgages, so if you’re unable to prove that you can make the repayments, there are not many lenders that will be willing to lend to you.

There are certain lenders who are more willing to take certain forms of income into consideration, such as overtime payments, shift allowances and benefits, so if you feel that these could help you meet the affordability criteria, a broker will be able to recommend the right lender. Another option is to look at borrowing less, which could improve your chances of success.

You’re Self-Employed or are a Contract worker and can’t prove you have consistent income

High street lenders in particular tend to favour stable income, and often stability is measured by employment type, with Self-Employed applicants being considered as having less stable income by some lenders, even where they are able to provide adequate proof.

There are certain lenders that are more flexible to the needs of Self-Employed and Contract workers, however, you will need to back up your earnings with accounts and/or tax returns for the lender’s minimum required period, which is often two years. That said, there are lenders that will look at applicants with only twelve months’ worth of accounting history, and this can also be easier for those in certain professions, such as doctors.

You may not meet other criteria for the type of mortgage you’ve applied for

Alongside affordability and employment type, there are multiple other criteria that you will need to meet, which can vary by lender and mortgage type. For example:

• Age – most, but not all, lenders have minimum and maximum age at application

• Property type – If you are interested in a property that’s considered non-standard construction many lenders will refuse to offer you a mortgage

• Certain Bad Credit – There are specialist lenders to accommodate most levels of bad credit, but if you have been declared bankrupt or been subject to a repossession order, there is very little chance of getting a mortgage until a defined length of time after they have been settled, usually 3-6 years, depending on the lender

There are mistakes such as incorrect addresses or other errors on your application form

This should not really stop you from getting a mortgage because this sort of error can easily be avoided. If there is incorrect data held on your credit file, it’s possible to request that this is removed, which is why looking at your credit record prior to an application is always a good idea.

With regard to other mistakes on the application, this should not occur so long as you have the application checked by an experienced broker. All addresses and personal information will need to be backed up with physical evidence.

How can I be declined if I had an Agreement in Principle?

An agreement in principle is just that, the principle being, that you are able to meet the lender criteria as suggested. This emphasises the importance of providing accurate information when you apply for an Agreement in Principle, because if the lender discovers that you earn less than stated, for example, they can absolutely reject your application.

Does being declined affect my credit score?

Not in isolation, however, as mentioned earlier in the article, multiple hard searches on your credit file will leave marks on your credit score. Regardless of whether or not you were refused credit, the applications themselves will reduce your credit score, and the more there are in a short space of time, the more impactful this will be.

What should I do if I have been declined?

If you’ve been declined for a mortgage don’t panic, it may be that you just approached the wrong lender for your needs. As all lenders have different criteria for all of their products and there are multiple thousands of products in the market, it can be difficult to isolate which one would be suitable to you.

Don’t apply for any more mortgages, or any other form of credit until you’ve spoken to a Mortgage Broker, as they will be able to prevent further damage to your credit score by preventing any more failed applications.

How can a Mortgage Broker Help?

A mortgage broker will be able to look at your personal circumstances and easily match you up with those lenders who are most likely to accept your application.

Regardless of why you’ve been refused a mortgage, there is always a chance that you may be able to find one elsewhere, so reach out to our team at McAteer and let us know the reason for your mortgage rejection.

Approved by The Openwork Partnership on 26/09/2023.