Quick Answer: Why Has My Mortgage Application Been Declined?
Having a mortgage application declined means that a particular lender has decided not to proceed with that application based on its assessment and lending criteria. It does not mean that every lender will reach the same decision.
A mortgage can be declined because of affordability, credit history, the evidence provided or an issue with the property. A lender can also decline an application after previously issuing an agreement in principle.
If this has happened to you, avoid rushing into another application. Finding out why the mortgage was declined can help you decide whether information needs correcting, your circumstances need to change or a different lender may be more appropriate.
Book an appointment before making another mortgage application
Common Reasons A Mortgage Is Declined
Mortgage lenders have their own criteria for deciding who and what they are prepared to lend on. An application can therefore meet one lender’s requirements and fall outside another’s.
If your mortgage has been declined, ask the lender or your mortgage broker whether any feedback is available. You may not always receive a detailed explanation, but any information provided can help identify what needs to be reviewed.
Some of the most common areas to look at include the following.
Credit History
Lenders use information from your credit report as part of their assessment. Missed or late payments, defaults, County Court Judgments and other adverse credit can affect an application.
Recent credit activity can matter too. Several credit applications within a short period can result in multiple hard searches appearing on your credit report, depending on the type of applications made.
Your credit score alone does not determine whether you will get a mortgage. Lenders use their own criteria and assessment processes, so there is no single credit score that guarantees acceptance.
Checking your own credit reports before another application allows you to look for inaccurate information and understand what lenders may see.
Affordability
A lender needs to be satisfied that you can afford the mortgage.
The assessment considers income alongside expenditure and financial commitments. Existing loans, credit card balances and other regular commitments can therefore affect how much a lender is prepared to offer.
This can result in an application being declined even when the applicant has a good credit history.
If affordability was the issue, applying immediately for the same amount with another lender may not solve it. The first step should be to review the figures and establish whether the proposed borrowing is realistic.
Income & Supporting Evidence
A lender will need evidence to support the income being used in the application.
The documents required depend on how you earn and the lender’s criteria. An employed applicant may be asked for payslips, while self-employed applicants can be asked for different financial evidence.
Problems can arise when the income shown on an application cannot be supported by the documents provided or does not meet the lender’s criteria.
An application can also become more complicated where income is variable, a job has recently changed or part of the applicant’s earnings comes from a source that a particular lender does not accept in full.
This does not automatically make the income unsuitable for a mortgage. It means the application needs to fit a lender that is prepared to consider the applicant’s circumstances and the evidence available.
Bank Statements & Financial Commitments
Bank statements can form part of the evidence requested during a mortgage application.
A lender may use them to help verify income and expenditure or understand financial commitments. Information on the statements may therefore lead to questions where it differs from information provided elsewhere in the application.
If a lender asks about a transaction or commitment, provide an accurate explanation and any supporting evidence requested.
There is no useful list of everyday purchases that automatically causes a mortgage refusal. What matters is the applicant’s overall circumstances and whether the lender is satisfied with affordability and its other requirements.
Your Deposit & Where It Came From
Lenders and the professionals involved in a property purchase may need information about the source of your deposit.
Money saved by the applicant is different from a gifted deposit, for example, and lenders can have requirements concerning the evidence they need for different sources of funds.
If information about the deposit is incomplete or does not meet the lender’s criteria, this can create problems with the application.
Before applying again, make sure the source and amount of the deposit are accurately recorded and that the relevant evidence can be provided.
The Property
Sometimes a mortgage application is declined because of the property rather than the applicant.
A mortgage lender is taking the property as security for the loan, so it needs to be satisfied with the property as well as the borrower.
Issues can emerge during the lender’s valuation or subsequent checks. A lender might decide that a property falls outside its lending criteria or that it is worth less than the agreed purchase price.
A valuation issue does not necessarily mean there is something physically wrong with the home. A mortgage valuation is primarily for the lender and is separate from a survey commissioned by the buyer.
Where the property is the reason for the decline, changing something about the applicant’s credit profile will not address the underlying issue. The valuation feedback and lender criteria need to be understood first.
At What Stage Was Your Mortgage Declined?
Working out where the application failed can help narrow down the reason.
Declined At The Agreement In Principle Stage
An agreement in principle, also known as an AIP, MIP or DIP, gives an indication of how much a lender may be prepared to lend based on the information assessed at that stage.
It is not a mortgage offer and does not guarantee that a full application will be accepted.
Credit-search practices also vary. Some lenders use a soft search when assessing an agreement in principle, while others may use a hard search. It is worth checking what type of search will be carried out before proceeding.
Mortgage Declined After An Agreement In Principle
It is possible to pass an agreement in principle and then have the full mortgage application declined.
A full application involves more detailed assessment. The lender can review supporting documents, affordability and the property before deciding whether to issue a mortgage offer.
Information discovered during these checks can mean an application no longer meets the lender’s criteria, even though the earlier AIP was successful.
Mortgage Declined During Underwriting
Mortgage underwriting is the stage where the lender assesses the application against its lending requirements.
A mortgage declined by an underwriter can relate to affordability, income evidence, credit history or another aspect of the application. The exact reason will depend on the lender’s assessment.
Being declined at underwriting does not create a separate category of mortgage applicant. What matters is why the lender decided the application did not meet its requirements.
Problems Following The Property Valuation
The lender also needs to assess the property being purchased.
A valuation can affect the application if the lender’s valuation differs from the purchase price or the property falls outside its acceptable lending criteria.
The next step in this situation may therefore be very different from the action needed after a credit or affordability decline.
Not Sure Why Your Mortgage Was Declined?
The right next step depends on whether the issue involved affordability, supporting evidence, credit history or the property. Our advisers can help you review the available feedback before another application is made.
What Should You Do If Your Mortgage Is Declined?
The first priority is understanding what happened rather than immediately looking for another application.
Ask the lender or broker for any available feedback. If you are already buying a property, keep your estate agent and conveyancer informed about the situation without making assumptions about whether the purchase can continue.
You can then review the information behind the application:
- Check your credit reports and look for information you do not recognise or believe is inaccurate.
- Review outstanding debts and the monthly commitments included in the affordability assessment.
- Check that income, employment and address information was entered accurately.
- Gather the documents needed to support the income and deposit stated on the application.
- Establish whether the refusal related to you, the requested borrowing or the property.
Where an error is identified, correcting the underlying information may be necessary before another application is considered.
If Debt Or Repayments Are Causing Difficulty
If you are struggling with debt or repayments, seek appropriate debt advice rather than taking on further borrowing simply to improve the chances of a mortgage application.
Will A Declined Mortgage Affect Your Credit Record?
The refusal itself is not normally recorded on your credit report as a “declined mortgage”. Your credit report can, however, show a hard search where one was carried out as part of the application.
Soft searches are only visible to you and do not affect subsequent credit applications. Hard searches can be seen by organisations checking your credit report. Several hard searches over a short period can affect how future lenders assess an application.
This is one reason to avoid sending applications to several lenders simply to see whether one accepts you.
Reviewing the reason for the original refusal and checking lender suitability first can reduce the risk of making applications that do not fit your circumstances.
How Soon Can You Apply For A Mortgage Again?
There is no universal waiting period after a mortgage application has been declined.
Whether it makes sense to apply again immediately depends on the reason for the refusal.
If an application contained an error that can be corrected, the situation is different from an applicant who needs time to address affordability or build a larger deposit. A property-related decline may require a different response again.
Waiting for an arbitrary number of weeks or months does not necessarily improve your position. The important question is whether the reason for the previous decline has been understood and whether the next application is suitable for your circumstances.
Can A Mortgage Broker Help After A Mortgage Refusal?
Speaking to a mortgage broker before applying again can help you review what happened and consider which options may be realistic.
At Key Mortgage Advice, an adviser can look at the information behind the declined application, including your income, financial commitments, deposit and available feedback from the lender.
Key Mortgage Advice provides personalised mortgage advice and has access to the whole of the market, along with exclusive deals where available. An adviser can compare your circumstances against lender criteria before deciding whether another application is appropriate.
That does not guarantee that a future mortgage will be approved. The lender still makes the lending decision and will carry out its own assessment.
A Simple Example
Consider a buyer who receives an agreement in principle and has an offer accepted on a property. During the full application, the lender assesses additional information and decides that the requested mortgage does not meet its affordability requirements.
Submitting the same figures to several other lenders immediately could result in further applications without addressing the original problem.
A more useful next step would be to review the lender’s available feedback, check the affordability figures and supporting documents and then consider whether another lender’s criteria may fit the circumstances.
This is a hypothetical example rather than a Key Mortgage Advice client case, but it shows why identifying the cause of a refusal matters before applying again.
Speak To Key Mortgage Advice After A Mortgage Decline
A mortgage application being declined can disrupt a property purchase, but the refusal should be investigated before deciding what happens next.
Key Mortgage Advice can review your circumstances, the application and any available lender feedback to help you understand the mortgage options that may be available. Our team can also support you through the mortgage process from application towards completion where a suitable route is found.
You can call us on 01772 620000 to discuss a declined mortgage application or book an appointment with a mortgage broker in Preston, Southport or Garstang before making another application.
This article provides general guidance, not personal financial, legal or tax advice. Lending criteria, product terms and eligibility vary. Seek advice based on your circumstances.
Mortgage Application Declined FAQs
Can a mortgage be declined after an agreement in principle?
Yes. An agreement in principle is conditional and is not a formal mortgage offer. A lender can decline the subsequent application after carrying out more detailed affordability, credit, documentation and property checks.
Will a mortgage refusal affect my credit record?
The refusal itself is not normally recorded on your credit report as a declined application. A hard credit search carried out during the application can appear on your report and be visible to other lenders. Soft searches are only visible to you.
How soon can I apply again after a mortgage is declined?
There is no standard waiting period that applies to every mortgage refusal. The appropriate timing depends on why the application was declined and whether anything needs to be corrected or changed before another application is made.
Can a broker help after a mortgage refusal?
A mortgage broker can review your circumstances and any feedback available from the previous lender before considering another application. They can compare lender criteria and help identify options that may be appropriate, but they cannot guarantee that a new application will be approved.
