Declined Mortgages

Buying or remortgaging a property can be a stressful time, but if your mortgage application is then declined, what do you do next? Here we walk you through why applications are declined and what options you have to still secure a mortgage.

Why would a mortgage be declined?

Every application is different, however one thing all applications have in common is that they need to pass the lenders criteria and underwriting checks.

Common reasons why people get a declined mortgage decision is due to:

• Credit Score – High street lenders have a credit score threshold that you need to pass to be considered suitable, however this is only one part of their overall decision making whether to approve you for a mortgage. Your credit score is dependent upon many factors such as your history of being able to manage credit (such as loans &/or credit cards). If you have no recent or current active credit this could result in a lower score, additionally if you have had bad credit registered such as missed payments, defaults, or CCJ’s this will have a bigger impact on your score. If you are not on the voters roll the lender cannot see electronically your address history, again this could be another reason why you have a lower score. Before making a mortgage application it is worth getting a copy of your credit file from CheckMyFile as it shows your credit profile from 3 different credit agencies being Experian, Equifax and Transunion. Lenders will review this information to make a decision on your application. Additionally having too much credit can result in a lower credit score.
• Affordability – How much you can borrow will be dependent upon many factors such as how much you earn, do you have any credit commitments to pay out for such as loans / credit cards, do you have any dependants (children for example) and over what term can you take the mortgage due to your age and planned retirement date. If you are self employed or a contractor this can be a little bit more complicated to work out how much you can borrow and it is advisable to discuss this with an advisor.
• Property – Houses and flats built with bricks and a tile roof are accepted by most lenders (providing the flat is not a high rise), however if the property is of non-standard construction (timber framed or concrete build) this maybe a reason why your mortgage could be declined by an underwriter.
  Another example, would be if you wanted to purchase a flat above a shop, this may not be acceptable to many lenders.

Working with an experienced mortgage broker who will research the market will ensure a high success rate with your application. With lots of lenders in the market, from high street banks & building societies to more specialist lenders that will help clients with adverse credit registered, there will hopefully be other options available.

I had a Mortgage agreement in principle and then declined – why?

A lender will issue a mortgage agreement in principle if the information keyed into their system passes the affordability check and the credit check criteria. This gives you an indication if you are likely to be accepted, however it is not until a full application is submitted, underwritten and a binding offer document is issued do you know that you have been accepted. There can be reasons why a full application is declined such as:

The information initially submitted on the agreement in principle request is not accurate and upon a full assessment by the underwriter you do not pass their criteria. An example of this would be your income – you may earn say £30,000 per year, but if this is made up of overtime, bonus etc, lenders may not accept 100% of the overtime / bonus income. Ultimately when getting an agreement in principle you need to be very careful that all the details submitted are accurate.

• Your credit score/profile has changed – Sometimes there can be a delay in your credit profile updating, so if you have missed a payment on a loan for example, this may not show up straight away on your credit profile, however a few weeks later it does show up and now you do not pass the lenders criteria.
• Bank Statement Review – The lender may after reviewing your bank statements decline your application due to missed direct debits, gambling or undeclared commitments.
• The property is not suitable – As mentioned if the property is of non-standard construction this could be an issue with many lenders. Some lenders do have minimum property valuations, so if when the property is valued it is ‘down-valued’ it may then not fit the lenders criteria.

Your mortgage broker will request documents upfront from you and review these thoroughly reducing the chances of an initial agreement in principle later being declined.

Can you overturn a declined mortgage decision?

If your mortgage is declined you should be told why that is. If you feel this decision is incorrect and you can provide some clarity to help the underwriter understand your situation, you could challenge this. By working with your mortgage broker they can help advise you on how to challenge a decision.

Mortgage declined by underwriter – What do next?

If you went to a lender directly and had an application declined, the next step is to work with a mortgage broker. Do your research, look at reviews and discuss your case with them thoroughly. Mortgage brokers have access to many lenders, high street based and more specialist, so based upon your needs and circumstances they will advise you on your mortgage options.

Mortgage brokers can help clients with a variety of transactions such as:

• Purchases – First Time Buyers, Right to Buy, and Home Movers
• Remortgages – Maybe you want to remortgage to a different rate, or remortgage to consolidate debts, or raise money for home improvements
• Buy to Let and Let to Buy Mortgages

How do I increase my credit score?

Increasing your credit score can take time, however these are the top tips for achieving a better credit score:

• Manage active credit well and do not miss any payments
• Limit the amount of credit you have and do not have your balances near their limits
• Be registered on the voters roll
• Do not have any unnecessary credit checks
• If you have any bad credit registered such as defaults or a CCJ, try and satisfy these.

Having a low credit score does not mean you cannot get a mortgage. You may struggle to pass a high street lenders credit score threshold; however there are specialist lenders who offer subprime mortgages that could help.

How to explore your mortgage options with The Money Hub

If you would like mortgage advice, please get in touch we would be happy to help. You can call us on 0203 725 5830 or complete the enquiry form and you can then schedule a call time.