The Next Steps After Being Declined for a Mortgage.

Being declined for a mortgage can be a devastating blow, especially if it was for a home your heart was set on. But it doesn’t necessarily mean your next mortgage application will be turned down or you won’t be able to get a mortgage in the future.

Here, we look at the most common reasons why mortgages are declined, how you can improve the chance of your applications being accepted in the future, and who to go to for help if you are declined for a mortgage.

Why has my mortgage application been declined?

declined for a mortgage

You must meet the lender’s criteria for your mortgage to be accepted. This list of requirements can vary between banks, but the most common reasons that mortgage applications are declined include:

  • Poor credit history caused by bankruptcy, excessive debt, too many credit applications or failing to pay bills on time.
  • Not being on the electoral register, you’re unable to vote.
  • Being self-employed or a lack of regular income.
  • Having a deposit that’s too small for the property you want to buy.

Should I find out the reason why my mortgage application was declined?

It’s always worth discovering why your mortgage was declined so you can work on correcting the problem. You may find that your application was turned down during the mortgage in principle stage, where a lender makes an initial decision about the amount they’ll let you borrow. Or it could be that your mortgage was declined by the underwriter whose assessment highlighted risks the lender was unwilling to take on. Once you know why your application was refused, you can think about what you can do to meet the necessary criteria if you still want to be considered for a mortgage in the future.

If you are self-employed with fluctuating income, you may explore other options like non-QM self employed mortgage loans, which cater to borrowers with irregular income sources.

Who can I speak to for help if my mortgage application is declined?

declined for a mortgage

If you have been declined for a mortgage, the next step is to speak to a broker to help you plan your next move. As well as helping you identify why your previous application was turned down, they can look at the criteria of other lenders to see if your circumstances better match their requirements. You might find, for example, that some banks don’t accept commissions as part of the income they include in their calculations. In contrast, others are happy to include it and use it as a basis to judge affordability.  

Will being declined for a mortgage affect my credit score?

Although having a mortgage declined can be very disappointing, having your application refused won’t affect your credit score. However, your report will show that a ‘hard search’ was carried out by a mortgage lender, even though it won’t state the result. Too many of these not only affect your credit score but will also be a red flag to other potential lenders. The best way to avoid this is by speaking to a mortgage broker about why your previous application was declined so you can correct the problem. Applying again too quickly without addressing the issue could mean another refusal, and another hard search will make being accepted for a mortgage more difficult in the future.

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