You went through the entire rigorous process of applying for a mortgage and providing painfully detailed information, only to find out that your application has been rejected. Now what?
First and foremost, do not panic. While a rejection certainly is a setback, it is nowhere near the end, and it definitely does not mean you cannot get another mortgage. The good news is that there are specialist brokers who can help you in such a situation, making sure you understand what went wrong and get right back on track.
Types of Mortgage Declines
A mortgage may be declined at different stages, and this will somewhat indicate its severity. This is another reason why you need not panic on receiving a rejection; it may not be as serious as you think. For example, your application may get rejected at the very first stage, that is the Mortgage Agreement in Principle. This is nothing that cannot be fixed, and should merely give you insight into possible reasons for rejection.
Does your credit history have late or failed payments on it? Is your current employment too recent? Do you have too many financial dependants?
With the help of an expert you can spot the problem and find a solution before applying again. In some cases, lenders may agree to an AIP but refuse to lend once you have found a property. While this would certainly be stressful in case you have already placed an offer, it is another minor setback that can be quickly and entirely fixed. The next stage is the underwriting. If you had an AIP approved, but then had your mortgage application rejected entirely, the lender’s underwriters were probably not convinced.
Reasons of Underwriting Rejection
This can be due to a number of factors that may have had a negative impression on the underwriters. For example, did you conceal something about your credit history? This may have gone missing at the time of the AIP, but found later, thus leading to a rejection. The latter may also occur if there are technical errors, for example, an error or incomplete information on the application form, unacceptable document, etc. In more serious cases, your income may be seen as unacceptable or not sufficient enough, after a detailed analysis of not only current but also future affordability.
Sometimes, it may not even be a fault of your own - certain lenders are extremely cautious about lending, and tend to analyse risks extensively. If the underwriters generally feel that lending to you could be risky at some point, it is likely to bring about a rejection.
What to Do After Rejection
Once your application has been declined, you can appeal the decision. Unfortunately, this usually does not help; it is likely that the underwriters already analysed your case in detail, and it is not often that they change their decisions. If you have been rejected at the AIP or the underwriting stage, the best solution is to consult and expert broker, or better yet, some specialising in rejected mortgages.
The expert will analyse your situation for you, as well as get in touch with the lender on your behalf, and point out the problem and its solution. Your broker will also tell you if there is a personal factor hindering your borrowing and how to fix it, or if you should merely try to apply to another lender, since the rejection may be your fault. In cases where a mortgage is rejected at a later stage, like after exchanges of contracts or literally at the last minute, your advisers must work with the lender to figure out a suitable explanation for breaching legal contracts, and ideally reach a mutual agreement.
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