What To Do If You've Been Refused a Mortgage

Being declined for a mortgage with one lender can be pretty disheartening, but it doesn’t automatically mean you’ll be rejected elsewhere. Getting a mortgage is still possible if you know which lenders are more suited to dealing with your application. 

In this guide, we’ll look at the typical reasons mortgage applications are rejected and how Haysto can help you follow the steps needed to give yourself a better chance next time. 

What do mortgage lenders look for?

When you apply for a mortgage, lenders will look at several factors before deciding if they can approve your application, such as: 

• Do you have enough income to comfortably afford your mortgage repayments?

• Your credit history - any credit issues registered (CCJs, late payments, etc.)

• Consistency of your income/earnings

• Size of your deposit

• Whether you’re registered on the electoral roll at your home address

• Your age

• Qualification criteria for a specific scheme: Shared Ownership, First Homes Scheme, etc. 

• Number of credit applications submitted in the last 3-6 months

Why mortgage applications are declined

Mortgage lending criteria vary from lender to lender, but the most common reasons why mortgage applications are declined would be: 

• Not enough income to cover the repayments. Mortgage lenders carry out an affordability assessment to make sure you can comfortably afford the monthly payments throughout the loan term. If the lender doesn’t see enough evidence for this, they won’t proceed. 

• Credit History. A lender will review your latest credit report to get an overview of how you’ve managed your finances over the last six years. Any bad credit issues registered on your record - CCJ, bankruptcy, missed payments, defaults, etc. could leave you with a poor credit score. 

• Complex income. If your income is inconsistent, a mortgage lender may not have enough confidence you can make the mortgage payments. This could be a particular issue if you’re self-employed, as your business revenue can vary from month to month.  

• Too much existing debt. A high debt-to-income ratio (DTI) would indicate to a lender that you might already be stretching your credit limits too far with existing loans and/or credit card debt. 

• Not registered at your address. Something as simple as not ensuring you’re registered on the electoral roll at your current residential address would likely lead to a refusal by a mortgage lender. 

• Too many credit applications in a short period. If you’ve been refused by one mortgage lender and then made multiple other applications over a matter of months, each one will leave a hard search on your credit report. 

It’s important to remember that every lender uses its own criteria when assessing a mortgage application. This means that some of the reasons outlined above might result in a refusal from one lender but not another. 

The specialist lenders we work with judge each applicant on a case-by-case basis and have a far better understanding of the complex issues that can result in a refusal from a mainstream lender. 

If you’ve recently been refused a mortgage, get in touch with us, and a member of our mortgage team can speak to you about the best steps to take from here. 

Can you have an excellent credit score and be refused a mortgage?

Yes, it’s possible. Your credit rating is one important factor assessed by mortgage lenders, but having a perfect credit score won’t automatically mean you’ll be accepted for any mortgage you want. If your income isn’t enough to cover the repayments or your overall debt-to-income ratio is too high, a lender can (and will) decline your application. 

Can a mortgage be declined after an agreement in principle?

An agreement-in-principle (AIP) indicates what a lender could allow you to borrow for a mortgage, and it is essential to have this in hand before you start looking at properties. But it isn’t a guarantee you’ll be approved, and if a lender finds something on your application that doesn’t fit their criteria, they can decide not to proceed, even after an AIP is in place. 

What steps you can take if you’ve been refused a mortgage

If your mortgage has been rejected, the smart move now is to speak with a mortgage broker - like us! - rather than reapplying straight away to other lenders and risking further harm to your credit score. 

Your mortgage broker can help establish why you’ve been declined so you can then make whatever repairs are necessary to your application, improving your chances of getting a mortgage when you next apply. 

Finding out why you were refused

First things first, you have to find out why you were refused a mortgage by the lender you applied with. If you don’t know what the issue is, you can’t fix it and if you can’t fix it you might never get the mortgage you need. 

Your lender doesn’t have to explain why they refused your mortgage application (some will, some won’t). If they do give you the information, you should share it with your broker so they can work with you to repair whatever the issue was. If not, your broker can help identify where the problem may lie. 

If affordability doesn’t appear to have been an issue or reason why the lender would decline you for a mortgage, the most obvious place to start is by downloading your credit report. 

Your credit record will show whether any credit issues are recorded that have impacted on your credit score. If there are any bad credit issues registered, it’s quite probable (depending on their severity and time since they were added to your record) that this will have been a factor. 

Rebuild your application

Once you’ve identified the issues that prevented you from getting a mortgage, it’s important to take whatever time is necessary to repair them and rebuild your application. 

Some positive steps you can take straight away are:

• Check your credit report and, if necessary, spend some time improving your credit score (particularly if your credit rating was the main reason you were refused initially)

• Check that you’re registered on the electoral roll

• Try to reduce any other existing debts and make sure all your financial commitments are paid on time every month

• Save for a higher deposit

• Gather as much evidence of your earnings as possible to back up the annual income amount declared on your application

• Don’t apply for any other credit unless absolutely necessary

Applying with the right lender

A rejection from one lender doesn’t mean all others will do the same. In many cases, the difference between getting a mortgage or not can depend on choosing the right lender most suited to dealing with complex applications. 

Our mortgage team works closely with several specialist lenders who help people in similar situations every day. To give you the best chance of success, they prefer a more human approach to assessing an application rather than use a computer-based checklist.

Does being declined for a mortgage affect your credit score?

Being declined for a mortgage won't directly bring your score down, your report will only show that you’ve applied (but won’t show if you were accepted or rejected). However, lots of hard search mortgage applications will signal to a lender that you've been previously rejected multiple times.

Hard searches are when lenders take a thorough and full look at your credit report and score. They can lower your credit score and make it harder for your mortgage application to be approved.