Lee and Neezam answer the most frequently Googled questions on mortgages that have been declined.
Can I get a mortgage after being declined?
The good news is that yes, you can. We’ll come onto the reasons and dig in a little bit deeper, but as a high level answer, you can still get a mortgage after being declined.
It might be more difficult but it’s not impossible. You’ll need to obviously find out why you were declined and potentially take steps to improve your situation. As always, do consider using a mortgage broker to find a lender that’s more likely to approve your application.
The decline could be for any reason – it might be something to worry about or it might just be that you approached the wrong lender for your circumstances.
Why would you get declined for a mortgage?
There’s a long list of possible reasons, but the word ‘decline’ doesn’t mean you can’t get a mortgage. It just means that the bank you approached wasn’t the right one for you.
A common reason for a decline is that you haven’t passed the credit scoring. Each bank has its own internal credit scoring and they are all different. Or, it could be that they can’t offer you the loan you require – so you’ve passed the credit score but they won’t give you the amount of money you’re asking for. That’s not necessarily a bad thing. It just means they’re not the right bank for you.
It could be that you have too much debt for the lender. Some banks have strict rules around the borrowing you have against your income. It could be simply that they don’t like the type of employment or self-employment that you’re in – for example, you work in the NHS and that doesn’t suit this lender. That’s why there are mortgage advisors that specialise in particular areas like ourselves.
The list of possible reasons for a decline is really long, and actually ‘decline’ is a horrible word. But it doesn’t mean you can’t get a mortgage.
At what stage can a mortgage be declined?
A mortgage can be declined at any stage of the application process, including the initial application after an Agreement in Principles has been issued.
We’ve heard of people having a mortgage declined after an offer has been made, if there’s been a change in circumstances. It’s important to stress that lenders don’t just withdraw mortgage offers for the sake of it. But If there’s a good reason – a change in your income, employment or a large new commitment that means you no longer pass affordability criteria – then lenders do reserve the right to do that.
Receiving a Mortgage in Principle is not a guarantee of acceptance. The lender may still decline the application after a further assessment. That said, any issues are likely to be picked up at Agreement in Principle stage. So that’s the first step – before you even find a property we recommend getting one. It will usually give us a strong indication as to whether that lender is going to accept you – and also how much they’re going to lend.
A mortgage offer is based on your credit profile, your deposit and your income and our job is to evidence everything. Then it’s down to that lender and their underwriter as to whether they’re happy to accept that application.
Does having a mortgage rejected affect my credit score?
There’s a lot of misconception around this. People worry that being rejected for a mortgage is going to leave a big back mark on their credit file. That’s not the case.
As we mentioned, the Agreement in Principle stage is the preapproval point of a mortgage, and that gives you a really good indication. The lender checks your credit report, which is one of the big parts of getting pre-approval.
Generally speaking, most Agreements in Principles use what we call a ‘soft search’ that doesn’t impact your credit score. There are very few banks that do a hard search, which does impact your credit record.
If you’ve been rejected for an Agreement in Principle, generally speaking it doesn’t impact your credit score, but do double check whether the lender will leave a hard or soft footprint. A hard footprint is not necessarily a problem, but what you don’t want is for multiple banks to leave hard footprints because that will impact your score.
The short answer, then, is that having a mortgage rejected can affect your score, but if it’s done correctly, it shouldn’t.
What should I do after my mortgage has been declined?
There are lots of things you’ll want to do – but the best thing is to find out why. Ask lots of questions to understand what you have been declined for. You need to identify the issue that’s stopping that lending. You might need to request a copy of your credit report.
You might just fail the affordability – sometimes lenders call it a declined mortgage but actually they would lend you a smaller amount. So you might see it as a big catastrophe where in actual fact it isn’t.
As advisers we do a lot of that work. We use our relationships with those banks and building societies to work out the reason for the decline. Then it’s a case of whether it’s something we can overcome or appeal. We’ll know whether it’s something we can push or if that would potentially be wasting time.
We might be better just to find an alternative lender. Advisers like us will already have a plan B and a plan C lender lined up. Plan A will most likely just be the most competitive option.
It can be tricky to get to the bottom of a decline if you’re on your own with a bank. You won’t have a full understanding of their lending policy or get access to the right people to talk to.
A broker can offer you that guidance and find a lender that will be willing to approve your application.
What else should we consider if a mortgage has been declined?
One of the biggest benefits of using a mortgage adviser is that we’re experienced and we know the market. So there’s much less risk of getting declined. If you’re doing things yourself, how do you really know which bank is going to be better for you? You could walk down the high street and approach Bank X and bank Y and be declined by both – wasting a lot of time and also potentially impacting your credit report.
Save all that hassle by going with an expert that knows which bank is going to be better for you. You might be an NHS employee, which means that specific banks will be better for you. Or perhaps your credit score is not quite up to scratch and you could be causing more damage. Speaking with a mortgage adviser will save you a massive headache. With a broker you’re much more likely to have your mortgage approved the first time.
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