Why was my mortgage application declined? What should I do next?
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With the number of mortgage approvals in the UK currently at an all-time high with around 150,000 - it is certainly an exciting time to apply for a mortgage.
But whether you are looking to get on the housing ladder or move house, getting approved for a mortgage is still not a straightforward process. In fact, many good candidates will find that their application is denied, especially young people under 24, who face a rejection of around 40%.
To shed some light on the matter, we speak to David Beard, the founder of price comparison site, Lending Expert, to understand why mortgage applications are declined and what you can do.
Why was my mortgage application rejected?
“Your mortgage application can be denied for a number of reasons,” explains Beard.
“On a basic level, this can be as simple as not being registered to vote or having a poor credit score or limited credit history to begin with.”
“Very often, it comes down to not matching the lender’s profile. When you apply with a bank or building society, they may have very strict criteria in terms of who they are willing to lend to, based on factors such as income, outstanding debt and deposit amount. They may also only have a limited number of mortgages that they are allowed to approve each month - which can make it trickier.”
“Sometimes it comes down to your deposit, if perhaps you can only put down 5% or 10% of the property’s value, the mortgage provider may think that you are trying to borrow too much.”
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“Some other things that can make mortgage approval difficult is if you are self-employed, a sole trader or have not been employed at the same place for very long - since lenders like to see a long-term, stable employment and income when they are choosing who to lend to.”
What are my next steps?
“If you have been declined for a mortgage once, do not worry, there are plenty of opportunities available and you can certainly get approved,” confirms Beard.
“For starters, have you considered using a broker? Rather than going directly to one bank or one lender, a broker will help match your criteria with a lender who is most likely to approve you - and only charge a fee upon the success of the mortgage going through.”
“You should also be open to looking elsewhere for a mortgage. You might have been a Barclays or NatWest customer for 20 years, but there are so many other mortgage lenders who might be a better fit for you across banks, building societies, challenger banks and private lenders.”
“Finally, if you are starting right from the beginning, you should sign up to vote for free, since this is always a good trust indicator. And if you are concerned about your credit score, consider using a free trial from one of the UK’s main credit reference agencies to check your score and see where simple and fast improvements can be made.”
“With potentially hundreds of lenders and multiple schemes available, you are certain to find the right mortgage for you.”
Think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on a loan or any other debt secured on it.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
To check your eligibility for a mortgage or secured loan, you can visit Lending Expert - or to speak with an advisor today by calling 0161 820 8099.