I've been declined a mortgage - what should I do?

Applying for a mortgage can be challenging - so it can be disappointing to go through the process and get turned down. But there are steps you can take to improve your chances of success.

Daniel Evans

Head of Mortgages

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Posted 26 MAY 2021

Why might I have been turned down for a mortgage?

A lender looks at the value of the property you want to buy, the deposit you’ve saved up and your general financial situation before coming to a decision on your mortgage application. Ultimately, it comes down to the question of whether the lender thinks you can afford the repayments.

Here are some common reasons why you might have been refused a mortgage:

Your credit score is low

When you apply for a mortgage, lenders will do a ‘hard’ credit search of your credit report. This gives them a better understanding of your financial behaviour and history, and your ability to pay back your mortgage.

Your credit report will show things like:

How much you owe on credit cards
Details of any other loans
Recent missed or late payments
County Court judgements (CCJs) in the last six years
Financial links with someone else - a joint bank account for example
If you’re registered on the electoral roll

Every time you make a credit application, it will show up on your credit file. Too many hard credit checks over a short period of time is a red flag for mortgage lenders. It can affect your credit score and your chances of being approved for a mortgage.

Your credit score might also be low if you’ve had little or no credit in the past, as lenders won’t have any evidence of how you manage money.

The lender doesn’t think you can afford the repayments

Since affordability rules were introduced in 2014, lenders have become far stricter when checking whether you can afford your mortgage repayments. This means they’ll go over your finances with a fine-tooth comb.

You’ll need to provide evidence of your income and your household expenses, for example, outstanding loans, child maintenance, utility bills and basic everyday living costs like groceries and clothing.

Lenders will also take into account known or likely future changes to your income or expenses that could affect your ability to repay the mortgage if interest rates go up.

You don’t have enough deposit

The economic uncertainty in the wake of COVID-19 means that many mortgage lenders have withdrawn their low-deposit deals, with many asking for at least 10% to 15%. The Government-backed mortgage guarantee scheme, which runs between April 2021 and December 2022, is designed to help homebuyers get a mortgage with a 5% deposit. But lenders will still look at whether the mortgage is affordable for you.

Too many credit applications

As we mentioned a bit earlier, repeatedly applying for credit could make mortgage lenders wary. Every time you apply for credit, a hard search will leave a footprint on your credit report. It could make you look a little desperate and could imply that you have money problems.

You’re not registered to vote

If you’re not on the electoral roll at your current address, lenders won’t be able to confirm who you are and where you live – simple as that.

An error on your credit file

A simple admin error on your credit file can have an impact on your credit score and therefore your ability to get a mortgage approval. For example, inconsistent name spellings, an old address or an unused bank account that you forgot to close.

The lender might not give a specific reason why your credit report isn’t up to scratch, so it’s up to you to check it out and correct any mistakes.

You don’t meet the lender’s criteria

Every mortgage lender is different and they all have their own criteria. It could just be that you don’t fit the profile type for that particular lender. For example, it might be that you’re self-employed or have lived in the UK for less than three years.

Some lenders are also picky about the type of property they’re willing to lend money for. If you don’t keep up with repayments on your home and it’s repossessed by your lender, they don’t want to be stuck with a lemon that they can’t sell on.

You haven’t provided the right paperwork

There’s a mountain of admin to complete when you apply for a mortgage. If you don’t supply a crucial bit of paperwork, like bank statements, you could find yourself being turned down.

The property is ‘unmortgageable’

It might be that your dream home isn’t one that a provider is willing to lend on. Lenders have their own criteria, but if the home you want to buy is non-standard in some way, you may be turned down for a mortgage. For example, it may be that the property’s walls are concrete rather than brick or stone, or it’s got issues like serious damp.

Just remember that these are ‘possible’ reasons why your mortgage application could be refused. Each lender has their own criteria, so a refusal from one, doesn’t necessarily mean the same for another, so try not to get disheartened. You could still find one who is prepared to offer you a mortgage

Your home may be repossessed if you can’t keep up repayments on your mortgage.

Did you know?

Some lenders refuse to offer a mortgage if you’ve been in your current job for less than a year.

What should I do if I’m refused a mortgage?

If your mortgage application is refused, you’ll want to know why. You can ask the lender why your application was declined. They don’t have to tell you the reason, but it’s worth a try.

Don’t apply for another mortgage straight away. This could make the situation worse as another hard check will be marked on your credit file and could lower your score.

If the lender hasn’t given you a specific reason, check your credit report to see if anything’s there that may have put them off.

You can check your credit report free of charge, from one of the three main credit agencies: Experian, Equifax and TransUnion. This won’t affect your credit score in any way.

Take your time to address any issues that may have caused your application to have been rejected, so you can improve your chances of getting approval next time.

How can I help my chances of getting a mortgage?

Once you know the reasons why your application was turned down, you can take steps to improve your chances of getting a mortgage:

Build up your credit score

You can start improving your credit score by paying off existing debts, paying your bills on time and closing any credit card or bank accounts you don’t use.

If you’re currently renting and always pay on time, consider joining the Rental Exchange scheme. The free scheme launched by Experian and Big Issue Invest, can help renters and social housing tenants boost their credit rating by recording their punctual rental payments and adding them to their Experian credit file.

Once you can show that you’re using credit responsibly, it should take around six months for your score to improve.

Top Tip

Avoid getting a new credit card at least six months before you apply for a mortgage, as it will temporarily bring your credit score down.

Cut back on your spending

Take a good look at your monthly outgoings and find ways to cut back on your spending. Lenders may ask to see at least your last three months of bank statements to compare how your income fares against your monthly spending. It’s definitely worth tightening the purse strings for a few months before you apply.

Cutting back on your spending can also help you avoid going into your overdraft. If you need to use your overdraft, lenders may think you’re living beyond your means.

Use our mortgage calculator to help you work out how much you might be able to borrow.

Save for a bigger deposit

Having a larger deposit means you should be able to access more mortgage deals, including ones with lower interest rates.

If you’re a first-time buyer, you might want to consider getting a Lifetime ISA. This is a tax-free savings account designed to help young people under 40 save up for a deposit on their first home. Each year you save, the Government will add a 25% bonus on whatever you have saved into it that year, up to a maximum of £1,000 per year. It could help you save up for a bigger deposit more quickly.

Apply for Help to Buy

If you’re a first-time buyer you may qualify for the Government’s Help to Buy: Equity Loan scheme. You’ll only need a 5% deposit. The Government will lend you up to 20% (of the full purchase amount) which is interest-free for the first five years, to buy a newly-built home under the scheme. Just be aware that not all lenders offer Help to Buy mortgages, so you’ll need to find one that does

Consider a guarantor mortgage

You could find a close relative (for example, a parent) to guarantee the loan and be responsible for the repayments if you fall behind. Guarantor mortgages differ from lender to lender, so it may be worth getting advice from a mortgage broker to see if this could be a serious option for you.

Register on the electoral roll

You might have a perfect credit rating, but if you’re not registered to vote, you can say goodbye to getting a mortgage. Lenders use the electoral roll to check your identity and make sure you are who you say you are and live where you say you live. It only takes about five minutes to register online and the service is free.

Correct any mistakes on your credit file

If there are any mistakes on your credit file, you should contact your credit provider as soon as possible so the issues can be fixed.

You can also write to the three credit reference agencies – Experian, Equifax and TransUnion – and ask for a ‘notice of correction’ to be put on your file. You’ll need to explain the problem so that it can be included in your report. For example, “a joint account with my ex-partner is no longer active”.

Double check the lender’s criteria

It’s really important that you meet the criteria of that particular lender before applying for a mortgage. Every lender’s criteria is different so check out exactly what’s required in order to qualify.

Before applying for a mortgage, it’s a good idea to get some expert advice from a professional mortgage broker. They understand the market and know what criteria each lender has. That means they should be able to recommend lenders who are most likely to approve your application.

If you’ve been refused a mortgage, your broker could also help you work out where you went wrong and what you can do to boost your chances next time.

Our partners, London & Country Mortgages Ltd (L&C)** offer fee-free mortgage advice. Get in touch with one of their expert advisers here:

**London & Country Mortgages Ltd (L&C) are a multi-award- winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).
L&C are not part of Compare the Market Limited. Compare the Market receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage.

Go to L&C Mortgages

Frequently asked questions

Why has my mortgage been declined after the agreement in principle?

An agreement in principle is only a ‘conditional’ offer based on basic information and a preliminary credit search. It doesn’t guarantee you’ll be given the mortgage.

If you’re refused a mortgage after you get an agreement in principle, it usually means the lender found something that didn’t meet with their criteria when they did a deeper search of your finances and credit file.

If you ask the lender, they should be able to tell you why you were rejected. Make sure you sort out the issue before applying elsewhere. It might also be wise to speak to a mortgage broker who could help you work out what went wrong and find a lender that’s likely to approve your application.

Why has my mortgage been declined after valuation?

As part of the mortgage process, lenders will carry out their own valuation of the property you want to buy.

The underwriter might decline your mortgage if the surveyor down-values your property. For example, if it needs significant repairs or it’s made from unusual construction materials, like wood, which could make it a bigger risk than a traditional property.

Why has my mortgage been declined after exchange of contracts?

This is very rare, but it can happen. In most cases, it’s because you’ve failed to disclose something pretty major on your original application, like bankruptcy, or you’ve given false information.

If this is the case, you’ll find it very difficult to get another mortgage, and you’ll also have to give up your deposit.

That’s why it’s vital that you’re 100% honest when making a mortgage application. If there’s something lurking on your credit file that you haven’t declared, the lender will find it anyway.

Does being refused a mortgage affect my credit score?

Being refused a mortgage won’t necessarily damage your credit score. Your mortgage application will appear on your credit report, but it won’t say if you were accepted or rejected.

But applying for another mortgage straight away could damage your score. Every time you apply for credit, a hard search will be marked on your credit file. Another application will result in another hard search, and so your credit score could dip further. Lenders will see this, and most likely reject your application.

If you’re refused a mortgage, give yourself a good few months before applying elsewhere. And in the meantime, do what you can to improve your credit score.