What to do if your mortgage is declined

41% of homeowners aged between 18-24 said they’d had a mortgage application rejected in the past, compared with just 4% of those aged 60 or above.

Spelling mistakes, undisclosed bad credit and a change of income are common factors that can result in a rejection but all too often, it’s the choice of lender that’s the problem.

This guide has been written to help anyone that’s been declined for a mortgage make sense of what to do next and where to go for advice.

What to do if your mortgage has been declined

The mortgage application process takes time and money, so getting declined can feel like a punch to the gut, especially if you’re in a hurry or keen to keep costs low.

Don’t lose faith. We’ve helped hundreds of people that have been declined for a mortgage find a better lender for them, elsewhere. Some lenders even allow the cost of mortgage application fees to be absorbed within the overall loan, so ask a mortgage broker about this as they’ll be able to highlight these lenders to you.

A mortgage can be refused at any stage of the process - for a number of reasons

A mortgage agreement isn’t final until your solicitor has transferred payment for the property to the seller. Up until that point, a number of things can go wrong during the mortgage process, including you getting rejected. This might happen because of:

• a change in lending criteria i.e. the lender’s interest rates increase and this pushes up the costs of your monthly mortgage repayments

• concerns about fraud

• affordability issues - i.e. your deposit isn’t big enough

• bad credit issues like a recent CCJ or undisclosed bad credit revealed during a deeper credit check 

• too many credit applications in a short space of time

• the way you earn your income. If you’re a freelance or contract worker, your income might not be deemed stable enough to make the repayments for a mortgage.

• your income changes - either because you’re earning more or less than disclosed on your application 

• the lender’s valuation of the property is less or more than the properties’ sale price

Here’s what you can do:

At pre-approval 

The pre-approval process feels like you’re applying for a mortgage because you’ll need to disclose your financial information to your chosen lender, who then makes a decision about whether they’re likely to approve the mortgage amount you have applied for. It’s at this stage, they’ll check your credit reports and this is where problems can arise for some people.

Different lenders use different CRAs (credit reference agencies) to look at your financial history. While one might use Experian and decide that yes, they can pre-approve you for a mortgage, another might refer to Clearscore, which might display different information.

Even factors like a wrong address or incorrect employment history can contribute to a mortgage being declined at this stage, so make sure that everything is accurate and crucially, try and have everything on all your credit reports match up. 

Discrepancies can raise questions while clear, correct information which presents an accurate reflection of your circumstances can help to present your application in the best light.

If you’ve been declined for a mortgage at the pre-approval stage you can:

Get in touch for advice. We’ll pair you with one of our mortgage brokers, they’ll listen to what’s happened and then guide you so that if you decide to apply again, your application is free from error, your credit reports have correct and organised information and it’s with the right lender

Read our guide for more information if you’re not quite ready to get in touch.

After obtaining an agreement in principle

You’d think that an AIP (agreement in principle) would guarantee that your lender would provide a mortgage to you but that’s not the case. AIPs or MIPs (mortgage in principle) as they’re also known, aren’t set in stone and if your chosen lender carries out a deeper check on your employment and credit history and they conclude that you no longer meet their criteria, your mortgage application could get declined.

If your circumstances change after you receive an AIP, you need to tell your lender because that could affect their ability to loan to you. Even a positive change in circumstances i.e. a pay rise, can result in an application being declined, so always disclose the information, not only to avoid getting rejected but to make sure you’ve truly got the best and most suitable deal based on your new situation.

If you’ve been declined for a mortgage after getting an MIP you can:

Ask a mortgage broker for help. Be open and honest about your application and your circumstances so they have the best chance in finding you a great lender.

Sometimes, it’s just a case of bad luck and the lender themselves may have changed their criteria. Our brokers know how disheartening it is to get a knockback at this stage and they’ll do all they can to push the process forward to avoid further delays.

Read our guide on what to do next if you’ve been declined for a mortgage after an AIP.

During the underwriting process

A mortgage underwriter is a professional that assesses the level of risk you pose to the lender. It’s their job to determine how likely it is you’ll default (not repay) your mortgage. To do this, your credit reports, bank statements and the mortgage application form itself, will be carefully checked for any signs of inaccuracies, fraud and money mismanagement.

These documents will be cross-referenced, so it’s vital that everything displays the same information about you  because if the underwriter notices that your PAYE slips declare a monthly income of say, £2,000 but your income on your bank statements is £2,500, they may query why there’s a difference and whether you’re trying to hide something.

If you’ve been declined for a mortgage during the underwriting process you can:

Find out what it was that resulted in you getting declined. If it was an error on your application, you might be able to reapply to the same lender once the error has been resolved, though this will depend on your choice of lender.

It might be the case that you don’t quite meet the affordability criteria of the mortgage product or mortgage amount you’ve applied for. If that’s the case, you might need to consider saving additional money for your deposit, reducing the loan amount, improving your credit score or applying with a new lender completely.

Getting rejected during the underwriting process doesn’t have to be the end of your hopes for homeownership. Read our guide filled with tips on how to improve your application or speak to an expert mortgage advisor so you know what to do next.

After the valuation

If your lender’s valuation of your chosen property is less than or greater than the sum you applied for on your mortgage application, you might get rejected and have to start the process again. That’s because the terms you agreed to follow were given to you based on the loan amount and criteria you previously met.

However, a new valuation changes the amount of loan you need in relation to the property value. Some lenders only lend 95% of a properties’ market value, so if the new valuation results in you now needing a 97% loan, for example, you would no longer meet that lender’s mortgage criteria.

If you’ve been declined for a mortgage after the valuation process you can:

Pay for your own independent valuation, though this will of course cost you more money and you run the risk that your surveyor will come to the same conclusion as your lender’s surveyor.

You could also try to negotiate the asking price with the seller or appeal against the lender’s valuation survey, though appealing will cost additional money.

Whether the valuation has flagged up a structural issue or if it’s the property type itself that has resulted in the rejection, you may still be able to get approved for a mortgage elsewhere, under different terms and conditions. Depending on the situation and your choice of lender, you could even end up with a better mortgage deal despite a recent rejection against your name.

After the exchange of contracts

Getting declined at this point is heartbreaking, especially if you’ve endured months of agonising patience, waiting for the day you can pick up your keys.

It’s less common to get rejected after the exchange of contracts but it does happen. It’s your solicitor’s job to organise and ensure that all the necessary documents and paperwork are in order before you exchange, so if they neglect to do this properly and issues are flagged, you could end up getting rejected, affecting the whole conveyancing process and losing your deposit.

If you’ve been declined for a mortgage after the exchange of contracts:

Yep, we’ve got a guide for that too. Read it here or use our online chat to ask an expert any questions you have and they’ll be able to quickly tell you what to do next.

What should I do now?

Don’t make a rash decision

Too many people make the mistake of hastily reapplying after getting declined, either with the same lender or alternative options. Applying for any finance without knowing why you were previously declined is like throwing blunt arrows at a target in the dark. Most will likely miss and that can really drag your credit history down.

That’s because credit rejections are visible on a credit report for up to 6 years, so future lenders can see this information in minutes and use it to make a decision about whether to approve or decline you

Find out why you’ve been declined

Knowing what it was that made the lender reject you could help you identify what to change, if anything, on your application. It might be the case that you just need to correct some errors like an outdated address but if it’s something bigger like an incorrect valuation, you might need help from a professional

Get your accounts and credit reports in order

Review all your paperwork (or have a mortgage broker do this for you). This minimises the risk of you getting rejected because of spelling mistakes, typos or outdated information.

If you’re self-employed, it can be helpful to have a chartered accountant manage your tax returns as this suggests to lenders that your accounts present an accurate picture of your income.

Find the best lenders

The deal you previously found and got declined for might not be the best option out there. Compare, compare and then compare again but don’t just rely on comparison sites. Some lenders only advertise directly on their own websites and others only allow intermediaries like mortgage brokers to put in an application.

Work with a reviewed mortgage broker

All too often people trust brokers that have been recommended to them by their estate agent, property developer or lender. There are some fantastic brokers out there but keep in mind that the broker you’re put in touch with might only be able to recommend a limited range of mortgage products depending on who they work for.

Our brokers have access to an online network of over 90+ lenders. That’s a vast selection of banks from highstreet names and niche lenders

Getting the right advice matters and misinformation or a reduced choice of lenders limits how good a deal you end up with, as well as whether you’ll get approved. 

Check your eligibility 

Check a lender’s eligibility criteria carefully so you can compare what they need from a borrower to your own circumstances. If you’re not quite the right fit i.e. your deposit is too small, or you have recent bad credit issues, then don’t apply

Wait, get professional advice and only ever apply for a mortgage when you’ve checked your eligibility

FAQs

What do I do if a well known bank or lender declined my mortgage application?

Barclays, Halifax, HSBC, Natwest and Santander are common names that crop up when we help people that have previously been declined. It’s not uncommon but don’t worry, getting declined by a highstreet lender doesn’t mean you’ll get declined by everyone. You might end up with a smaller, unheard of lender that can offer greater flexibility in their terms or you might even consider alternative lending products like bridging loans.

A good mortgage broker can let you know why you got declined, how to reduce the likelihood that you’ll get rejected again and where the best deal can be found. 

Can you get a mortgage with bad credit?

Yes! There are UK lenders with criteria that’s open to applicants with bad credit, even severe issues like CCJs and bankruptcy can be acceptable under the right circumstances. Lenders don’t always immediately reject you for bad credit but that’s not to say that all will be happy to approve a substantial home loan to someone with a rocky credit report.

To prepare and position yourself in the best light in the eyes of a lender, tidy up your credit reports, stay out of your overdraft and keep your credit utilisation low so that you can repair your credit history and reduce the risk of getting rejected

We’ve found affordable mortgage agreements for hundreds of people, each with their own history and hopes of owning a property.

Can a mortgage be declined after the valuation fee has been paid?

Yes, and if you do get declined at this stage, you might lose any money paid in mortgage arrangement fees, valuation fees or solicitor fees.

Work with a good mortgage broker from the offset so they can use their knowledge to help you avoid any hiccups and navigate through the issues during your application that are out of your control.

How long should I wait before I apply for a mortgage again?

There’s no perfect time frame that’s advisable to wait if you’re eager to reapply but know that most lenders look unfavourably on mortgage rejections, so put some distance between your first mortgage application to your next. Most lenders, though not all, will pay closer attention to credit applications made in the last 6 months.

Multiple applications for credit don’t suggest that you’ve carefully thought about the financial consequences set out by the lender, so don’t reapply straight away and ask a mortgage broker to highlight which lenders are most likely to approve you based on your circumstances.