What stops you getting a mortgage?

Reasons underwriters reject mortgages 

Your eligibility for a mortgage depends on a number of different factors – largely how much risk is involved from the provider’s point of view. At the end of the day, they want to feel confident that you can afford to pay them back in full.  

Each lender has their own mortgage criteria, so if you’re declined by one you may get accepted by another.

A good starting point is to ask the lender why your application was rejected, so you work on it to help you get approved next time.

If your mortgage is declined after an agreement in principle is put in place, it could be for one of the 10 reasons below.

1. House valuation was lower than expected 

All mortgage providers take your loan-to-value (LTV) into account. This relates to the difference between the value of the property you’re buying and the mortgage you’re taking out. The higher your mortgage is, the more risk there is of you going into negative equity if house prices drop. (Negative equity is when you owe more than your house is worth).

So, if the property value turns out to be lower than the amount agreed on by your mortgage in principle, they may not be able to offer you that mortgage. Problems like structural damage and extreme damp can lower the value of a property during valuation and cause this to happen.

2. Incorrect information on your application form 

If the information on your application form isn’t correct (or doesn’t match your mortgage in principle) the lender won’t be able to offer you a mortgage unless it’s updated. They need factual information backed up with evidence.

3. Too many recent credit applications 

Making lots of applications for credit in a short space of time can damage your credit score. This is because every time you apply for credit, including mortgages, a footprint is left on your credit report for lenders to see.

In turn, having a low credit score makes you less likely to be accepted for a mortgage because providers see you as more of a risk to lend to.

You can check your credit score for free without leaving a footprint on your credit history.

4. Failed affordability checks 

Mortgage providers conduct affordability checks (or affordability assessments) when you apply for a mortgage. This is to see whether you can afford the mortgage repayments. Essentially, they compare your income to your outgoings to see if there’s any room left in your budget.

If the provider isn’t sure whether you can afford the mortgage repayments (both now and in the future), they may decline your application.

5. Insufficient proof of income 

You need to provider your lenders with sufficient proof of your income, otherwise they won’t know whether you can afford the repayments. Normally they require payslips or bank statements as evidence. If you’re self-employed, you’ll need to supply extra documentation, such as tax return forms, so it’s best to speak to an accountant and mortgage adviser for help.

Unfortunately, self-employed people can find it harder to get approved for a mortgage because they don’t always have enough evidence of a stable income. If you get rejected for a mortgage and you’re self-employed you simply might not have been trading long enough or earning a consistent amount.

6. Too much debt  

When the mortgage lender conducts their affordability check, they’ll look at your monthly outgoings. If they see a large amount of debt, they may think that you can’t afford a mortgage on top of it. They may reject your application as a result, or accept it with high interest rates to offset the risk to themselves.

7. Bad credit or no credit history 

Lenders want to see that you’re a responsible borrower through your credit history. If you have bad credit or no credit history, you may have fewer options. So, you may want to speak to a mortgage adviser or broker that specialises in bad credit.

Also consider building up your credit score before applying again. This can help you to access more competitive deals in the future.

8. Small deposit 

Most lenders require you to put down a deposit on a property when you apply for a mortgage. 100% mortgages exist but are incredibly hard to get. People are putting down larger deposits than they used to, with many people contributing at least 10%-15%.

If your deposit is less than this, it could put lenders off, as there’s more chance of you going into negative equity with a small deposit (if house prices drop).

9. Not being registered on the electoral roll 

If you’re registered on the electoral roll, mortgage providers can verify your identity quickly and easily. Not being registered can make it harder for them to confirm who you are - and even stop your mortgage application going through.

10. Upcoming changes in your circumstances 

Mortgage providers base the decision whether to lend to you partly on your lifestyle. If you have major changes coming up, such as a new job or baby, they will have to take these into consideration. Something like childcare fees can affect your affordability for a mortgage.

Can I get a mortgage? 

Whether you can get a mortgage depends on whether you fit the lender’s mortgage eligibility criteria. This largely comes down to your individual circumstances.

How to check your mortgage eligibility 

You can check your mortgage eligibility in these five ways:

• use a mortgage calculator – these can be found online
• speak to a mortgage adviser – they can tell you on whether you’re likely to get accepted
• check your credit score – you can do this online for free
• work out a budget – knowing how much you spend will give you an idea of how much you can borrow

What happens if your mortgage application gets rejected? 

If your mortgage application gets rejected, you should speak to a mortgage adviser. They are experts in the market and can give you guidance on where you went wrong in your application and which lenders might accept you.

Remember, lenders all have different criteria so being rejected by one doesn’t mean you can’t get a mortgage.

Does getting rejected for a mortgage affect your credit score? 

Making any form of credit application leaves a footprint on your credit history for lenders to see. So, your credit score may be affected when you apply for a mortgage - whether you get accepted or rejected.

The good news is that this is a temporary blip and won’t have a huge effect on your credit score - unless you make lots of credit applications in a short space of time.

Do solicitors charge if a house sale falls through? 

Solicitors are likely to charge you for the time they spend on your behalf even if your house sales fall through. In this situation, some charge a percentage of their overall fee. There may be others who don’t charge at all – although that’s very rare.

Factors to qualify for a mortgage 

There are several factors you need to qualify for a mortgage:

• reliable income – you’ll need this to prove you can afford the mortgage repayments
• pass a mortgage affordability check – this is conducted by the lender and proves you have enough spare cash to meet your repayment plan
• a good credit score – lenders check your credit history when you apply to see if you are a reliable borrower
• afford the repayments in the future – if something happens, like redundancy, you’ll still need to pay your mortgage

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