Applying for a mortgage can be stressful. There's lots of documents and information you need to put together and it’s crucial
to know in advance all the common reasons which may cause your application to fail and what to do next if a lender rejects your mortgage application.
1. Poor Credit Rating and/or History
Credit ratings are used to help lenders understand your ability to manage debt. If you have a poor credit history, your mortgage application is less likely to be approved.
To get you started, we've arranged a free credit check with our partners at CheckMyFile. To get your free credit report, click this link. It's important to check your credit file and make sure there is no incorrect information on your credit report. The good news is that if you find incorrect information, you can correct it.
Having no credit rating can also be a problem. No credit rating means lenders won’t find proof of how good you are at paying debts off.
Getting a mortgage approval with bad credit is more difficult, but not impossible. A good financial adviser or mortgage broker will be able to find the best deal for your circumstances and give the appropriate advice.
2. Not enough income or deposit
If your income is considered too low, your application will be rejected. So before you apply, you should check what you can afford in your current situation. Depending on your specific situation, you could ask for a smaller mortgage or see if you can join one of the government home buying schemes like help to buy.
If your deposit is low, the lender has to contribute with a higher sum of money. This means that you’ll be offered worse rates and deals by lenders who may be concerned about repayment. If you are unsure about how to proceed, the best move is to get advice from professionals. They can help you make the best possible decision and also give you access to a wider range of lenders that are not available to individuals.
3. High amounts of debt
If you are already paying off loans, credits, or any other financial product, your chances of getting approved may be lower. However, paying off that debt before applying for a mortgage could potentially have a negative impact on your credit score. So the best move is to seek advice from a professional mortgage broker.
4. Lots of applications in a short amount of time
Applying for a mortgage will leave a hard search record in your profile. Therefore, if you are initially rejected for a mortgage and then try several more times with multiple lenders, you could find yourself in a situation where a high number of hard searches have been made against your record. This lowers your score and reduces your chances of getting approved.
5. Not registered to vote
Not being registered to vote in your electoral roll makes it more difficult for lenders to confirm your identity and where you live. It’s a good idea to make sure that you are registered to vote at your current address. So if you move home, please make sure that you register at your new address as soon as possible.
6. Self-employment and/or contractors
When you are self-employed or a contractor it could be more difficult to prove that you have consistent income. Usually, lenders will ask for proof of steady income through tax statements and annual accounts for the past two or three years. They can even ask you to prove that you have work lined up for the future (long term contracts with clients can be useful in this regard).
However, being an independent professional doesn’t mean that you can’t protect your financial situation. There are income protection insurance products specifically designed for the self-employed and contractors that can prove most useful if you find yourself unable to generate any income due to sickness or injury.
7. Payday Loans
If you have taken out a payday loan, it will be present on your credit file for six years (even if you always paid on time). Some lenders may think you will struggle to pay your mortgage if you take out payday loans, so you will potentially need to find a suitable lender that doesn’t turn down applications from people that have used a payday loan.
8. Lived in the UK for less than three years
If you have just moved to the UK you will need to find suitable lenders as well as make sure that you’ve got all the required documents to prove you have the right to work and live in the UK. A mortgage broker could be especially helpful in this situation.
9. Application Errors
Having errors on your application, like information that doesn’t match on different records, will lead to applications being rejected. It is a very good idea to make sure you have all the information you need before you start an application.
Administrative errors can also happen; lenders can make mistakes. If you suspect this could have happened to you, ask the lender about the details of the credit reference agency they used so you can further investigate.
What can I do if my mortgage application is declined?
If you have been refused a mortgage, your next step is to check your credit history to see if something that made the lender think you weren’t suitable. Once you find the reason, the best way forward is to make yourself attractive to lenders by improving your credit score and trying to save a bigger deposit. Finally, after making these improvements, complete your new application with care and attention.
If you are finding it difficult to find a suitable mortgage, our friendly and approachable team can help you. Call Steel and Co. on 01502 446000 or email