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Why was my mortgage declined in underwriting?
Once you've found a mortgage deal, made your application and compiled your evidence, having your mortgage declined can be a very frustrating experience.
There are many reasons why a mortgage lender could decline your application. The most common ones are that you've not submitted all the correct information; you don't meet the eligibility criteria; or that your credit rating shows something that needs further investigation.
The most frustrating thing is that often you'll feel there's nothing you could have done differently, and it can be a confusing time.
As a whole of market mortgage broker, we can help you with your application and may even be able to correct something on your credit file so that the underwriter can see an up-to-date picture of your situation.
What is mortgage underwriting?
Mortgage underwriting is a process that your prospective mortgage lender goes through to check you're a reliable borrower. Even if you've been granted a mortgage in principle, there is no guarantee the deal will be confirmed when the lender conducts their underwriting process.
As well as your credit report, a mortgage underwriter will check your employment status, income details and any other evidence you've supplied to show that you'll be able to afford the payments.
Lenders may ask for information or documentation they haven't requested previously to complete your application successfully.
The mortgage lender will also want to check that you've not missed any payments and may also ask for evidence of your income, so will require payslips or a letter from your employer confirming how much you earn.
Mortgage underwriting also needs to take into account the property that you want to buy. This way, they can make sure you're not borrowing more than it's worth, and there won't be any repossession issues further down the line.
Why did underwriters decline my mortgage?
Although you may find it frustrating, your mortgage application can be declined for several reasons.
These include:
Adverse credit issues
Having bad credit on your credit report is a common reason for mortgage rejection. A mortgage lender will be concerned with the age and severity of your bad credit. Most lenders will reject mortgage applications that show more serious credit issues in their credit history, such as bankruptcy, a CCJ or IVA.
Other red flags to mortgage lenders can be payday loans, applying for additional credit regularly or if there's a large change in your credit score.
Having a poor credit score
Having a poor credit score can be another reason for having your mortgage declined. There is a whole range of factors that make up your score, including:
Credit age
How long you've had credit
The amounts borrowed and the number of accounts
Having very little credit history or not being established for very long could impact whether you are accepted.
If you're concerned about having a poor credit score, you can take steps to improve your situation by using credit sensibly and making repayments on time. This will help to show mortgage lenders that you're a reliable borrower.
Excessive debt
Even if you have a good credit score, if you have high debt levels, this can ring alarm bells for mortgage underwriters.
They will need to make sure that you can afford mortgage repayments, and the interest will not be so high that you'll struggle to pay them back.
Income issues
As well as checking your credit report and any other evidence provided, one of the main things mortgage underwriters do is to check your income. From this, they can work out how much you can afford and whether you're a reliable borrower in terms of making mortgage payments, both now and in the future.
Income verification is likely to be a common reason for mortgage underwriters declining your application. If you're self-employed, having at least two years of accounts will help the underwriter assess this.
High levels of expenditure
If you have high levels of monthly expenses, this can be a red flag that you may struggle to afford your monthly mortgage repayments.
The underwriter will want to know that you can afford to pay all of your monthly costs. High levels of expenditure on credit cards, loans, etc., is a potential risk to the lender, so this would be taken into consideration during underwriting.
Property issues
Another reason for having a mortgage declined by underwriter is due to problems with the property. Being non-standard construction, for example, is a common reason for mortgage underwriters declining your application.
If the property is in poor condition, this will also be taken into account, especially if it would cost a lot to put right.
What to do if your mortgage application is declined
A mortgage is declined in underwriting when the lender decides not to approve it after reviewing all of the information about you and your finances.
The reasons why your application may be declined are numerous, so it's important to make sure you do everything you can to avoid this happening.
Make sure that there is proof of all income and employment status on your credit report, as well as clearly showing how you'll afford the payments.
There should be no missed payments on your credit file, and if there are, ensure that you provide a good explanation for this to avoid your application being declined.
If your credit history is poor, make sure you're keeping up with the required monthly repayments on time. You could consider making additional payments on your credit card or other debts to show that you're able to pay them back.
Finally, ensure your property is in good condition and will not cause any problems for the lender, as this can be a common reason for mortgage applications being declined because of problems with the property.
Can mortgage brokers help?
Yes! Your best chance of getting your mortgage approved is to work with an experienced mortgage broker - like our team at Teito.
Not only will working with a whole of market mortgage broker mean your application will have more chance of being approved, but it will also give you access to more mortgage products, which means you're more likely to find the best deal for your circumstances.
To see what difference having an expert mortgage broker by your side can make, start searching online now and get your mortgage in principle in minutes!
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
Get started on your mortgage journey with us
Last updated 16 September 2024