Published 13th April 2018
What to do if you have been rejected for a mortgage
First of all: DON’T PANIC. I can’t shout that loud enough! We literally receive hundreds of enquiries from people just like you every week – those who have been declined by their bank, and even those who used a broker and were still declined. The important thing to remember is that we work with the specialists who successfully arrange previously declined mortgages every day. For example:
Mortgage declined at different stages:
Acceptable reasons for mortgage rejection:
- Mortgages refused due to low credit score or bad credit
- Declined a mortgage not on the electoral role
- Mortgages refused as a first time buyer
- Buy to let mortgage rejected
- Mortgages declined due to income and affordability (& self employed)
Get an agreement in principle today by enquiring here, and we will pass you on to one of the experts who arranges previously declined mortgages every day
There will be an infinite number of reasons as to why your mortgage application has been declined, most of the time it’ll be because the lender you applied with wasn’t happy about certain specific things. Thankfully, every lender has a different policy on what is and isn’t acceptable, and many specialise in certain areas. So, just because one lender has turned you down in the past, doesn’t mean there isn’t a lender out there for you right now.
What to do if you can’t get an agreement in principle
If you have had a mortgage pre-approval declined then this is usually because you haven’t passed the lender’s internal credit score. Every lender uses its own scoring system to interpret every factor of the application, and has its own ‘pass mark’ that they require applicants to achieve in order to be approved.
There may be a whole range of reasons you’ve not met their minimum criteria, but that may be acceptable with other lenders - for example:
- Recent bad credit events
- Having a high Loan to value (LTV)
- Having a high Loan to income (LTI)
- Not long enough in current employment
- Not a long enough address history
- Not being registered on the electoral roll
- Deposit coming from a gift rather than own savings
Thankfully, if you’ve had a declined mortgage in principle for any of these reasons and more – there is almost always other options. Many of the specialist lenders will have more flexible rules when it comes to something fundamental holding the approval back, and some even have no credit score system at all – assessing cases manually.
By enquiring here we will pass you on to one of the experts who arranges previously declined mortgages every day therefore increasing your chances of getting an agreement in principal.
What to do if you had a mortgage rejected after having an agreement in principle (AIP)
HELP! I’ve had a mortgage agreed in principle then declined, what do I do?
We love enquiries like this. If you have been refused a mortgage after an initial agreement in principle the outlook is usually far better than if you’ve never been approved. Often the reason for decline is because your bank is inflexible, or your broker has not done their homework before submitting your application and you have ended up applying with the wrong lender that would never have approved the mortgage in the first place. Typically mortgages declined on full application can be rescued if your broker knows what they are doing!
Why have I been accepted then declined?
Usually being denied a mortgage after pre-approval will be for one of 2 reasons:
- On full application a deeper credit score has picked up undisclosed adverse credit information.
This is one of the most common reasons for decline after AIP stage, and lenders are pretty strict with non-disclosure because it can appear as though the borrower is 'trying it on' to get the application through. Bad mortgage brokers don't do their research and cross their fingers the lender doesn't find out about the issue, good brokers do their homework and find a lender that will be happy with it, because they know if the adverse is not disclosed, when the lender finds the issue (which they invariably do) the application will be declined when it would have been approved had the issues been disclosed from the outset. Adverse issues can be overcome because there are lenders who are happy to consider a whole range of adverse credit events, including recent late payments, defaults, CCJ’s, and even repossessions and bankruptcies.
- On review, the mortgage underwriters declined the application because of their policy. This may be because you haven't been in your job long enough, or perhaps they are not happy with recent use of Payday loans for example. When the decline reason is simply a policy reason, this is usually good news because it means you were deemed creditworthy and passed the initial credit scoring system, but then had the mortgage declined at full application stage for some other specific criteria that many other lenders may be happy with.
What to do about it?
- Firstly, you need to establish what went wrong.
This can sometimes be done by talking to the lender and asking (sometimes begging) them for more information. They seldom share with you the exact reasonif it is to do with credit reporting as data protection laws often restrict their access to that information, so they usually ‘point you towards your credit report’ or hide behind the excuse of ‘not met credit score’. That said, it’s always an idea for you and your broker to push them on it, because if the reason for decline was something to do with policy (i.e. not happy with length of time in a job / deposit source / etc) it is often something another lender would be happy with.
If the lender doesn’t help, don’t worry. The specialists we work with know the market like the back of their hands and work with lenders every day, so can often tell you why your mortgage was declined after an AIP without even talking to them!
- Obtain credit reports.
If the decline was out of the blue, if you haven’t met the required credit score, or if you know you have bad credit but aren’t sure of exact dates and amounts, then we always recommend getting copies of your credit files. Visit our page here for links to the free trials.
- Make an enquiry! We will have one of the experts in rescuing mortgage applications call you back ASAP.
Get an agreement in principle today by enquiring here, and we will pass you on to one of the experts who arranges previously declined mortgages every day
Mortgage declined in underwriting
My mortgage application has been declined by the underwriters, can you help?
If you’ve had an agreement in principle with a lender already approved but then had your full mortgage application rejected, it is likely that the lender’s underwriters were not happy with either:
- Something undisclosed in your credit history,
- Something on the application form,
- Documents you’ve supplied not being acceptable,
- Income used not being acceptable,
- The feasibility / reason for the mortgage,
- Their attitude toward how risky the case is overall.
It’s important to remember that every lender is different. Underwriters exist to decide if you are a ‘good risk’ and will generally look to lend money where this is within reason, they are however, limited to the policy guidelines of the lender they work for, and it is rare underwriters are given a mandate to consider cases that fall too far away from the lenders’ core business. This can bring about some interesting and often puzzling decisions where it’s apparent the customer is creditworthy, but the particular rules in the policy say otherwise and the mortgage is rejected.
For instance, it might seem a no-brainer that you’d lend to a borrower wanting £100,000 who has been self-employed for 1 year earning £1 million, but if the lending policy requires applicants to have 2 or 3 years trading, the case would likely be declined.
For the majority of borrowers there are lenders out there, scores of them – you just have to know where to look and how to package the application in the right way to give underwriters the opportunity to approve the case. If you have an underwriter declined mortgage application, you would be well advised to use a specialist broker who is aware of each lenders policy. If they do their homework first and only apply once they know your situation is acceptable to all knowable criteria, then you’ll have the best chance of approval.
Get an agreement in principle today by enquiring here, and we will pass you on to one of the experts who arranges previously declined mortgages every day.
Appealing a declined mortgage
Unfortunately for many borrowers, appealing a mortgage that has been declined by an underwriter is often futile. Without good reason or any further evidence to support a positive decision that wasn’t known at the point of review, the underwriters VERY rarely overturn negative decisions. From experience, time is far better spent finding an alternative lender with slightly different policy who is likely to take a different view on the reasons for decline.
Mortgage refused after valuation
If your mortgage has been declined after valuation it is likely to be because something on the valuation report has either down-valued the property or flagged up concerns that make the lender question it’s suitability as security. Properties can be deemed unsuitable if the construction and material type is not within the lenders policy, or because it is not structurally sound and is in need of significant repair work.
Down-valuations are hard to do anything about, without specific comparable properties of a similar construction that have sold recently in the area. Properties that aren’t acceptable construction type with one lender may still be acceptable with another – again, it is always best to check with the lender before application if you think the property may not be suitable to avoid last-minute mortgage declines and incurring significant valuation fees etc.
Mortgage declined after exchange of contracts
Fortunately having a mortgage fall through after exchanging contracts is extremely rare, but it does happen.The god news is that there are still lenders who would offer a mortgage after being declined late on in the process.
There may be a number of reasons that the lender was unhappy with something that came to light late on in the process. Typically at this point the mortgage would have been offered, so they would already be happy with the income, deposit, credit score, the property etc. and usually the reason for decline is due to some historical adverse credit.
By rights, your advisor should be making everything apparent to the lender before you even make the application, then the credit search should pick other info out that has not been disclosed. So if you have any adverse credit the lender should know about it already and there should be no unexpected surprises. Sometimes however, if the adverse credit was not disclosed from the outset, it can be that it isn't picked up on the credit search (such as IVA's/Bankruptcy etc.), which can happen if the lender predominantly uses Experian and the credit issues only show on the Equifax report. If these credit issues come to light and are outside of the lender's policy, then they are within their rights to withdraw any formal offer to lend, which can be after exchange of contracts.
So, next steps... Don't panic!
Make an enquiry - the advisors we work with arrange mortgages that have been declined previously and they will find you a lender if there is one out there for you!!!
Mortgages declined at the last minute!
HELP! My mortgage has fallen through before completion, I need one quick!
It shouldn’t get to the stage where you’re ready to exchange contracts and complete on a purchase, before it becomes apparent your mortgage is not ready. Sadly, this happens more than you might think! If you need an express mortgage service make an enquiry right away and make sure you add 'EXPRESS' to the comments field.
What to do if your mortgage is refused due to low credit score
Being declined a mortgage for...
If you have had a mortgage declined due to low credit score then as explained above, it doesn’t mean you’ll not meet the score with another lender. Low scores are caused by a whole number of things, not just bad credit events on your file, and there are specialist lenders who don’t use scoring systems you’ll be far more likely to find finance with.
These are some of the most common enquiries we come across when it comes to low credit score, all of which are perfectly acceptable by lenders in the market.
What to do if your mortgage is refused due to bad credit
There are lenders available that are happy with applicants who have:
- Late payments,Defaults, or CCJ’s,
- Bankruptcy or repossession,
- Debt management
If you know you’ve had bad credit in the past, you need to define exactly what went on before trying to find a mortgage lender to consider your application. You’re advisor will need to know exactly when and how many late payments/defaults/CCJ’s; if you’ve had a bankruptcy, the exact dates of registration and discharge, and the sum involved; if you’re in a debt management plan, when it started, how much you owe, which creditors are involved, and what your conduct on the plan has been. Etc etc. Really get to grips with the situation you are in, and then use a broker to find you a mortgage accordingly.
Of course if all this is foreign (it is to most people!) and you don’t know where to start, then get copies of your credit reports and forward them to your advisor to produce a summary of all the issues on your files, and then match the details on your file with appropriate lenders.
What to do if your mortgage is declined due to income and affordability
‘Acceptable’ forms of income can be a fluid concept, and is completely different depending which lender you are applying with. Some lenders accept 100% of one thing but completely ignore another; some calculate averages, some use absolute figures; some require a long working history and a permanent contract, others will lend to people in probationary periods or even based on a future contract you haven’t started yet. If your income is made up of multiple streams, is unique, or is ‘out of the norm’, it can be a real minefield and only a seasoned broker is likely to be able to help find the best lender for you.
Affordability wise, mortgage lenders all use their own systems to establish feasible maximum borrowing levels. Some are old-school and work from income multiple calculations, simply taking your annual salary and multiplying it by 3, 4 or 5, others will approach it by calculating what’s affordable month to month and factor in rate increases as a ‘stress test’. In general though, mortgage lending is capped at around 4x annual income with a few specific lenders stretching up to 5x. Occasionally this can be increased over 5x on a case-by-case discretional basis for those with higher incomes and large loans. For this reason, selecting the right lender can make a huge difference to the maximum you can borrow.
As an example, a salesman on a basic salary of £20k and annual commissions of £60k earns £80k a year, but in trying to borrow as much as possible he finds that many lenders only accept 50% of commission. Let’s say lender A is one of these, and therefore considers him to have a £50k annual income. To help with the search, he approaches a decent broker who tells him that some lenders are more generous and accept 80% of commission (some may even go higher than this!), and so let’s say lender B would consider income to be £68,000. If both lenders offer up to 5x income then max borrowing with lender A would be £250k, but lender B would go up to £340k – a massive impact.
What to do if your mortgage is declined because you are self-employed
Self-employed borrowers have had it tough when it comes to borrowing since the old FSA put a stop to self-cert mortgages, and with the market review changes in April 2014 criteria has only tightened with a lot of lenders. This however, has created gaps in the market certain specialist lenders have exploited, and some are very accommodating to self-employed borrowers, offering mortgages and secured loans to those declined from the high street. There are lenders that are happy with mortgages in the following circumstances:
- 1 years self-employment
- Considering a loss in the last 3 years
- Declining trend in profits
- Lending based on net profit / retained profits not drawn, when a Ltd company
- Lending based on salary + dividends when a Ltd company
- Self-employed with bad credit
- Self-employed on Help to buy or with small amount of deposit
What to do if you’re a first time buyer and your mortgage is refused
It's rare that mortgages are declined specifically because the applicant is a first time buyer (FTB). Usually the reason for a mortgage decline is down to something else the lender isn't happy about, such as bad credit or affordability for example. Occasionally some lenders will place additional requirements on borrowers who have never owned a property before, for instance certain high street lenders will stipulate that all FTB's must have a minimum annual income of £20,000, and some specialist lenders who consider adverse credit for FTB's demand a higher income than that to try and offset some of the additional risk associates with lending to them.
First time buyer buy to let mortgages (FTB BTL's) are a unique mortgage proposition and often come with certain specific criteria that FTB's have to meet in order to gain approval. This is largely in part to the recent crack down on borrowers taking BTL mortgages on a property they intend to live in, when they cannot afford their own residential deal. Now, all FTB's looking to take a BTL will need to prove they can afford the loan as if it were a residential. FTB BTL's are also tested for further feasibility in more depth than homeowners and experienced landlords, because lenders can be concerned as to why someone would buy for an investment and continue to pay rent on their own residence.
What to do if your Buy to let mortgage application is rejected
Buy to let borrowing has also tightened up since the credit crunch, since self-employed self-cert mortgages disappeared, and since the market review changes in April. This is down to a mix of changes in regulation and an increase in fraudulent ‘back-door buy to let’ applications, where borrowers unable to prove income enough to afford the mortgage they need were buying under the guise of renting it out, but then moving into it themselves.
As such lenders have clamped down on this, and customers who are considered a likely risk of committing fraud in this way are required to prove income as if the mortgage was a residential deal.
That said, as with any market that tightens up, there are lenders who can take advantage and offer unique criteria to attract business from smaller niche areas. As such it is possible to obtain buy to let mortgages when:
- No personal income at all (experienced landlords only)
- No minimum income limit (new & existing landlords only need an income, regardless of size)
- First time buyer BTL (never owned a property but buying a rental)
- Bad credit BTL (wide range of adverse credit accepted)
- Self-employed BTL (BTL mortgage with as per self-employed circumstances explained above^^^)
I’ve had a mortgage declined, so what next? Make an enquiry! We will pass you to the most relevant advisor for your circumstances, one who handles enquiries and successfully arranges mortgages like yours every day.