Top Reasons why you Might be Rejected for a Mortgage and What to Do Next

16 November 2021, by Matt Stevens

Applying for a mortgage can be a challenging process! With so many documents and information you need to put together and the research required to find the most suitable deal If you’re applying for a mortgage, it’s crucial to know in advance all the common reasons which may cause your application to fail and what to do next if a lender rejects your application.

1.Electoral roll/Not registered to vote

Not being registered to vote in your electoral roll makes it more difficult for lenders to confirm your identity and where you live. It’s a good idea to make sure that you are registered to vote at your current address. So if you move home, please make sure that you register at your new address as soon as possible.

 

2.You are self-employed or a contractor

When you are self-employed or a contractor it could be more difficult to prove that you have consistent income. Usually, lenders will ask for proof of steady income through tax statements and annual accounts for the past two or three years. They can even ask you to prove that you have work lined up for the future (long term contracts with clients can be useful in this regard). 

However, being an independent professional doesn’t mean that you can’t protect your financial situation. There are income protection insurance products specifically designed for the self-employed and contractors that can prove most useful if you find yourself unable to generate any income due to sickness or injury.

 

3.Credit Rating & Poor Credit History

Credit ratings help lenders to understand your ability to manage debt and pay on time. They use it to analyse your suitability as a client. If you have a poor credit history, you will be less likely to get a mortgage approval. 

You can check your credit file with agencies like Equifax and Experian and see the information they have about your profile. It is important to check this file and make sure there is no incorrect information on your credit report. The good news is that if you find incorrect information, you can correct it. 

Having no credit rating, for example, if you have never taken out a loan or a credit card, is also problematic. No credit rating means lenders won’t find proof of how good you are at paying debts off.

Getting a mortgage approval with bad credit is more difficult, but not impossible. In our guide about bad credit mortgages, you will learn how you can secure a mortgage if you’ve had financial difficulties that have affected your credit score. 

 

4.Too Many Applications: Does being declined a mortgage affect my credit score?

Applying for a mortgage will leave a hard search record in your profile. Therefore, if you get initially rejected for a mortgage and then try several more times  with multiple lenders, you could find yourself in a situation where a high number of hard searches have been made against your record. This lowers your score and reduces your chances of getting approved.

 

5.Too much debt

If you are already paying off loans, credits, or any other financial product, your chances of getting approved may be lower. However, paying off that debt before applying for a mortgage could potentially have a negative impact on your credit score. So the best move is to seek advice from a professional mortgage broker

 

6.You’ve taken out a payday loan

If you have taken out a payday loan, it will be present on your credit file for six years (even if you always paid on time). Some lenders may think you will struggle to pay your mortgage if you take out payday loans, so you will potentially need to find a suitable lender that doesn’t turn down applications from people that have used a payday loan. 

 

7.Income & deposit

If your income is considered too low, your application will be rejected. So before you apply, you should check what you can afford in your current situation. Depending on your specific situation, you could ask for a smaller mortgage or see if you can join one of the government home buying schemes like help to buy.

If your deposit is low, the lender has to contribute with a higher sum of money. This means that you’ll be offered worse rates and deals by lenders who may be concerned about repayment. If you are unsure about how to proceed, the best move is to get advice from professionals. They can help you make the best possible decision and also give you access to a wider range of lenders that are not available to individuals. 

 

8.Lived in the UK for less than three years

If you have just landed, you will need to find suitable lenders as well as make sure that you’ve got all the required documents to prove you have the right to work and live in the UK. If you need advice about mortgages for new arrivals, please fill in this easy to complete form.

 

9. Errors on your application

Having errors on your application, like information that doesn’t match on different records, will lead to applications being rejected. It is a very good idea to make sure you have all the information you need before you start an application.

Administrative errors can also happen; lenders can make mistakes. If you suspect this could have happened to you, ask the lender about the details of the credit reference agency they used so you can further investigate.

 

What can I do if my mortgage application is declined?

If you have been refused a mortgage, your next step is to check your credit history to see if something that made the lender think you weren’t suitable. Once you find the reason, the best way forward is to make yourself attractive to lenders by improving your credit score and trying to save a bigger deposit. Finally, after making these improvements, complete your new application with care and attention.

If you are finding it difficult to find a suitable mortgage, our friendly and approachable team can help you. Just fill in this no-hassle form and one of our advisers will contact you to discuss the best way forward and help you find the best deal.

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