Head of Content
Mortgage Advisor & Director
Why do mortgage applications get rejected?
Having your mortgage application rejected can feel like the world is ending. If you've had your mortgage declined, you're not alone. Many people who have previously had a favourable agreement in principle go on to be rejected after making their entire application.
The best way to boost the chances of getting your mortgage approved is by using an experienced mortgage broker - like our team at Teito! Not only can we recommend the right mortgage provider for your situation, but we can also help when it comes to your application. Even if your credit history is patchy, we can still help you get approved!
We know what mortgage providers are looking for in approval, so by knowing these requirements, you are already ahead of the game!
So why do so many applications get rejected? Our team has come up with a list of the most common reasons for rejection below.
Common reasons why mortgage applications are declined
There are many reasons why your application may be turned down following the in-principle decision. Here are some of the most common reasons why mortgages get rejected:
Issues with your credit report
Mortgage lenders will check your credit report with one of the main credit reference agencies when they review your mortgage application.
If you have a poor credit history, this could be one of the reasons why a mortgage application is declined. Your credit score alone is not the only factor lenders look at when they assess your application, but it can be a big barrier to getting the mortgage you need.
Examples of other issues on your credit report include:
- You've missed or made late payments recently, which indicates that you are not a reliable borrower.
- You've made too many credit applications recently, which a mortgage lender can see when they check your credit report. Too many credit applications can show you will be unable to make future mortgage repayments.
- Payday loans are another indicator that you are in financial difficulty. Taking out a payday loan to service can show that you are struggling with day-to-day bills.
- Your credit report shows you have too much debt, which could indicate to a mortgage lender that you will struggle to make mortgage payments.
- Your mortgage application has been declined because of an IVA or CCJ. These will stay on your credit report for six years after being satisfied.
If you're struggling with a poor credit history and worry that your application will be declined, a mortgage broker can help by recommending mortgage providers who will accept your application.
Inconsistent Income
Having a steady income is one of the key requirements that lenders look for when assessing mortgage applications. If you have a variable income, it can be more difficult to get your mortgage application approved than if you were employed.
If you are self-employed or come from a contracting background, proving consistency is often more of an issue that can cause problems with approval. Some lenders may request three years of accounts to prove you have a constant income. Self-employed applicants may also be limited to how much they can borrow.
If your income jumps around, it can indicate that you may struggle to repay your mortgage. Even if you're employed, you may also struggle to find a mortgage lender if your income varies due to commission or bonus payments.
An experienced mortgage broker (like our team at Teito!) can recommend the best lenders for people who are self-employed or have variable income streams. They will also advise the best ways to prepare your application to help with mortgage approval.
Customer affordability
When you apply for a mortgage, lenders look at your income and expenditure to see if it's affordable. Mortgage providers don't just base affordability on your monthly take-home pay; they also look at your outgoings.
They look closely at your income and outgoings, investment properties you may own, and any other debts you have, including credit cards and student loans.
For this reason, it's important to give your mortgage broker details of all your financial commitments when you apply for a mortgage.
When the affordability calculation shows there's not enough cash left over in your monthly budget once expenses are deducted, lenders can refuse to lend to you. Getting help from professional mortgage brokers can help you find the right loan for your financial situation.
Other eligibility criteria
Mortgage lenders will have different eligibility criteria for the products they offer. These lending criteria will determine how much the lender is prepared to lend you or if they will approve your application.
For example, if you exceed the maximum age of the mortgage product you are applying for, the lender will decline your application.
The property
Your property will also need to meet certain requirements for the application to be approved. For example, there will need to be a certain amount of equity in the property, particularly if you're buying a new build.
The property will generally need to be of standard construction and meet other criteria, although there are lenders who will consider non-standard construction property.
How to improve the chances of your mortgage application being approved
- Have a clear picture of what you can borrow
- Reduce your debts before applying for a mortgage
- Take steps to improve your credit history before making your mortgage application.
- Get help from an experienced mortgage advisor
- Make sure your application documents are accurate, up-to-date, and easy to understand for your lender.
By following these tips you can increase the chance of getting approval for a mortgage.
The best chance of qualifying for a mortgage is to contact an experienced mortgage advisor who can offer advice according to your unique situation.
Please don't take any risks when it comes to the biggest purchase of your life. If you need help, get it! With Teito, you can compare and apply for your mortgage online, so there's nothing to lose except the stress of mortgage applications.
Our brokers are experienced in this complex market and will work hard on your behalf, so you get the financial support you need for you to realise your property dreams. Even if you have a bad credit history, we can help to get your mortgage application approved.
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.
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Last updated 28 February 2024