My Mortgage Was Declined — What Should I Do Next?

A mortgage decline can feel definitive.

It often is not.

A lender declining an Agreement in Principle or full mortgage application means that the case did not satisfy that lender's requirements at that point.

The important question is:

Why was it declined?

Until that has been established, immediately applying somewhere else can create more problems than it solves.

First: Don't Panic-Apply to Other Lenders

One of the most common reactions after a mortgage decline is to try another bank immediately.

Then another.

That is rarely the best starting point.

If the underlying problem is still present, repeated applications may simply generate further declines and additional credit searches.

It is normally better to investigate the first decision.

A Mortgage Can Be Declined for Many Reasons

The cause is not always poor credit.

Possible reasons include:

Affordability

The lender's calculation does not support the mortgage requested.

Credit history

Issues might include:

• Missed payments
• Defaults
• CCJs
• Arrears
• High credit utilisation
• Recent borrowing
• Undisclosed commitments

Income

The lender may not accept some or all of the declared income.

This can particularly affect:

• Self-employed applicants
• Company directors
• Contractors
• Bonus income
• Overtime
• Commission
• Multiple jobs

Employment history

A recent job change, probation period or unusual employment arrangement may fall outside a lender's criteria.

Residency

Visa or residency circumstances can affect lender eligibility.

Deposit

Questions may arise around:

• Amount
• Source
• Gifted deposits
• Overseas funds
• Unusual transactions

Property

Sometimes the applicant is acceptable but the property is not.

Issues can include:

• Construction
• Condition
• Valuation
• Lease
• Commercial use
• HMO use
• Location
• Title problems
• High-rise or cladding concerns

At What Stage Were You Declined?

This is important.

Agreement in Principle / DIP / AIP decline

Usually based on an initial combination of information and credit assessment.

It is not the same as a fully underwritten application.

Full mortgage application decline

The lender may have reviewed substantially more information, such as:

• Payslips
• Accounts
• Bank statements
• Credit file
• Deposit evidence
• Residency
• Property

Understanding the underwriter's reason becomes particularly important.

Valuation decline

Sometimes the borrower passes underwriting but the lender will not accept the property or its valuation.

That requires a different solution from an income or credit decline.

What If the Lender Will Not Tell Me Why?

Some automated lending decisions provide limited detail.

That does not always mean nothing can be established.

Useful starting points can include reviewing:

• Your credit report
• Declared income
• Bank statements
• Existing debts
• Application details
• Lender criteria
• Property
• Recent financial activity

The objective is to identify plausible points of failure before choosing another lender.

Mortgage Declined Despite Good Credit?

This happens.

A strong credit score does not guarantee mortgage approval.

Mortgage underwriting involves much more than the headline score displayed by a consumer credit-report service.

A lender may still decline because of:

• Affordability
• Internal score
• Income
• Existing debt
• Property
• Deposit
• Residency
• Lender-specific policy

Likewise, somebody with historic adverse credit may still have mortgage options depending upon the circumstances.

Credit is one part of the case.

Check the Application Was Correct

Occasionally a decline can arise from incorrect or inconsistent information.

Check matters such as:

• Addresses
• Employment dates
• Income
• Existing credit
• Dependants
• Deposit
• Property information

Never change accurate information simply to obtain a different lending decision.

The objective is to ensure that the application correctly represents the circumstances.

Check Your Credit File

Before another application, it can be useful to review your credit history across the relevant credit-reference information available to you.

Look for:

• Unknown accounts
• Incorrect addresses
• Missed payments
• Defaults
• CCJs
• Financial associations
• High balances
• Recent searches

If something is genuinely inaccurate, it may be possible to raise a dispute with the relevant organisation.

What If the Problem Is Affordability?

Another lender may calculate affordability differently.

That does not automatically mean somebody else will lend more.

The case should be assessed to establish:

• Income
• Accepted income
• Existing commitments
• Dependants
• Required loan
• Deposit
• Mortgage term

Only then does it make sense to research alternative lenders.

What If I Have Adverse Credit?

Do not assume that every lender applies the same credit policy.

They do not.

Potential lender assessment can depend upon:

• Type of adverse credit
• Amount
• Date
• Whether satisfied
• Frequency
• Reason
• Conduct since
• Deposit
• Other circumstances

A historic minor issue may be viewed differently from recent significant arrears.

What If the Property Caused the Decline?

Changing lender without understanding the property problem can lead to the same result again.

Establish whether the concern relates to:

• Market value
• Construction
• Condition
• Lease
• Planning
• Commercial element
• Rental suitability
• Title
• Building safety

Some property issues are lender-specific.

Others can make the property difficult to mortgage across much of the market.