Facing a mortgage rejection can be frustrating and disheartening, but it’s far more common than you might think. If you’ve had a mortgage declined in the last 12 months, you’re not alone – but importantly, a declined mortgage doesn’t spell the end of your home-buying dreams.
At the heart of this guide, we’ll explore the steps to take after your mortgage application has been rejected, how to avoid common pitfalls and the most frequent reasons why applications get turned down. With expert advice and the right strategy, you can still secure the mortgage you need.
Mortgage Declined? Here’s What to Do Next…
Before exploring the specifics, it’s important to remember that being rejected by one lender doesn’t mean another won’t accept you. The key is not to panic or reapply hastily. Instead, take a strategic approach by following these steps:
1. Avoid Reapplying Immediately
It’s tempting to jump straight into another mortgage application after a rejection, but this can do more harm than good. Each mortgage application leaves a mark on your credit file. Multiple applications in a short space of time can negatively impact your credit score and further reduce your chances of approval.
Rather than risk further rejections, it’s essential to take a step back and understand the root cause of your initial decline. Getting the right advice at this stage is crucial, as an experienced mortgage broker can help you understand what went wrong and how to address it.
2. Check Your Credit Report
Your credit report plays a significant role in a mortgage decision, and if your application has been declined, your next step should be to check your credit report for errors or negative marks. Too many credit inquiries or even small missed payments can flag concerns to lenders.
By reviewing your report, you’ll know if your credit score needs improving or if you need to address specific issues. Make sure to download your credit report from all major UK credit agencies – Experian, Equifax, and TransUnion. Correct any inaccuracies and consider ways to improve your score before reapplying.
3. Seek Specialist Mortgage Advice
After being declined, it’s crucial to consult with a mortgage advisor who specialises in helping people in similar situations. Not all brokers are created equal, and some may not have access to the right lenders for your circumstances.
A specialist broker will be able to identify lenders who are more likely to approve your application, even if you’ve had issues such as bad credit, affordability concerns, or deposit requirements. They will have existing relationships with these lenders and know how to navigate the market to find the best solution.
4. Consider Your Affordability
One of the most common reasons for mortgage declines is affordability. Lenders must be confident that you can afford the monthly repayments, and if your income or outgoings don’t meet their criteria, they may reject your application.
It’s worth reviewing your current finances and calculating your income-to-debt ratio. A broker can help you explore lenders who may be more flexible when it comes to irregular income streams, self-employment, or lower deposits.
Top Reasons for Mortgage Declines
Understanding why mortgages are declined is essential for improving your chances next time around. Here are the six most common reasons why a mortgage application may be rejected:
1. Income and Affordability Issues
Many applicants are turned down because their income doesn’t meet the lender’s requirements or their outgoings are deemed too high. This is especially true for those with complex income streams, such as freelancers or self-employed individuals.
2. Bad Credit
If your credit history contains missed payments, defaults, or CCJs (County Court Judgments), many lenders will view you as a high-risk borrower. However, some lenders are more lenient with bad credit – this is where working with the right broker can make a difference.
3. Deposit Requirements
Most lenders require at least a 10% deposit, but some may ask for more, depending on your circumstances. If your deposit is lower than the lender’s threshold, this could result in a rejection.
4. Bank Overdrafts
Lenders may view frequent overdraft usage as a sign of financial mismanagement. This includes both arranged and unarranged overdrafts, which can negatively impact your application.
5. Gambling History
A history of regular gambling, even small amounts, can raise red flags for mortgage lenders. Some lenders see gambling as a risk factor, which can result in an automatic decline.
6. Valuation or Property Issues
Even if your finances are in order, a mortgage can still be declined if the lender’s surveyor deems the property to be worth less than the amount you’re borrowing or if the property has structural issues.
Mortgage Declined After an Agreement in Principle (AIP)
Many people assume that securing an Agreement in Principle (AIP) means their mortgage is a done deal. Unfortunately, this isn’t always the case. While an AIP can give you an idea of how much you can borrow, it doesn’t guarantee final approval. You may still be declined at a later stage, often due to more thorough checks on your finances or the property itself.
If your mortgage has been declined after receiving an AIP, it’s essential to figure out why. It could be related to a change in your circumstances or an issue uncovered during a deeper review of your credit report. Speaking to a mortgage advisor who understands these situations can help you address the problem and find a more suitable lender.
What To Do If Your Mortgage Is Declined by the Underwriter
The underwriting process is where a lender takes a detailed look at your application, credit report, and financial situation. It’s not uncommon for mortgage applications to be rejected at this stage, especially if the underwriter finds discrepancies or issues that weren’t apparent earlier.
If your mortgage has been declined by the underwriter, the good news is that this isn’t necessarily the end of the road. A specialist broker can help you understand why the underwriter made their decision and guide you on how to adjust your application to improve your chances of success next time.
Many times, applicants are declined due to small details that can be corrected, such as incomplete paperwork or minor credit issues. Don’t give up – get expert advice to rework your application and target lenders with more flexible criteria.
What If Your Mortgage Is Declined After Contract Exchange?
Being declined after contract exchange can feel like a nightmare – you’re so close to securing your new home, only to have the process grind to a halt. But again, this isn’t the end. Mortgage rejections at this stage typically happen due to last-minute concerns about the property or a change in your financial situation.
If your mortgage is declined at this point, it’s vital to act quickly. A swift reassessment of your finances or finding an alternative lender who can offer an emergency mortgage may be the key to getting back on track. Mortgage Knight’s expert advisors have helped countless clients recover from last-minute rejections by securing alternative funding options and fast-tracking new applications.
Why Working with a Specialist Broker Matters
One of the most important things to remember if your mortgage application has been declined is that the right advice can make all the difference. Many mortgage rejections come down to working with the wrong lender or needing better guidance from the start.
A specialist mortgage broker, like those we work with at Mortgage Knight, understands the nuances of the lending market and has established relationships with lenders who are more flexible. We know how to match you with the right lender for your specific circumstances, even if you’ve been turned down elsewhere.
Whether it’s overcoming bad credit, deposit challenges, or navigating complex financial situations, Mortgage Knight is here to help. Our expert team will guide you every step of the way, ensuring you have the best chance of approval and securing the home you deserve.
Professional Contractor Mortgage Guidance
If you’re a contractor looking for professional mortgage guidance, we’re here to help. Our specialist knowledge and lender relationships enable us to provide expert advice tailored to your situation.
Schedule your consultation today. We’ll discuss your circumstances, explain your options, and provide honest advice about the best approach for your contractor mortgage application.
