10 Surprising Reasons Your UK Mortgage Application Got Rejected (And How to Fix Them!)

Navigating the UK housing market can be both exciting and daunting, especially when it comes to securing a mortgage. However, the journey from viewing dream properties to getting the keys can be interrupted by an unexpected hurdle: a rejected mortgage application. Rejection can feel disheartening, but understanding why your mortgage application was turned down is the first step toward success in your next attempt. Here are ten common reasons why your mortgage application can be rejected.

 

Reasons your mortgage application can be rejected

 

#1. Poor Credit History

Your credit score is a vital factor in the mortgage approval process. Late payments, unpaid debts, or a history of bankruptcy can significantly negatively impact your score. Lenders use your credit history to assess your reliability as a borrower, and a poor credit score can lead to mortgage application rejection. Some lenders will be less concerned by your specific credit score but rather your payment conduct and any adverse events on your credit report. Making sure you make all payments on time and in full, and not taking out excessive amounts of debt will all assist in keeping your credit history and credit score as good as possible. Here’s how to find your credit report and improve your credit score

 

#2. Insufficient Income or Employment History

Lenders need to verify your ability to repay the loan. A stable income and solid employment history demonstrate financial stability. If your income is deemed too low or your employment history is erratic, lenders may question your ability to make regular mortgage payments. If you are employed make sure you declare your income as it is not overstating anything, and make sure any variable income is declared as such. For self-employed make sure your documentation matches up with what you declare, lenders are likely to ask for SA302s, tax year overviews, and if appropriate company accounts.

 

#3. High Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes towards paying debts. If this ratio is too high, it signals to lenders that you may struggle to manage additional mortgage repayments. If you have savings it could be beneficial in paying off debt, this in the long term will help you save faster, but make sure you balance this with having the required amount of funds for your deposit.

 

#4. Inadequate Deposit

A substantial deposit reduces the lender's risk. If your deposit is too small, it affects the loan-to-value ratio and increases the lender's risk, which could lead to mortgage application rejection. Saving for as big a deposit as possible is essential for your home buying and mortgage success. If you can’t see a way to save for a deposit but are ready to jump onto the property ladder, then working with property management companies, e.g. Keyzy, could be a good option for you.

 

#5. Property Problems

Sometimes the problem lies not with the mortgage applicant but with the property itself. If the lender deems the property a poor investment (due to its condition or location, for example), they may reject the mortgage application. Property issues can vary greatly from the construction type, locality of the property (i.e. is it above a shop that opens late), and many potential legal issues. If you’re absolutely in love with the property you can speak to alternative lenders about the issues to see if they would be happy to proceed, seeking out a mortgage broker to help you do this can be beneficial.

 

#6. Incomplete or Incorrect Application

Accuracy is crucial when filling out your mortgage application. Incomplete details or errors can lead to misunderstandings or doubts about your reliability as a borrower, resulting in rejection. If a lender believes you have knowingly lied about something they may be less likely to believe anything you tell them and may decline to proceed any further. Understanding and knowing a lender’s criteria can help here, but we recommend using a mortgage broker to help you.

 

#7. Lack of Credit History

Having little or no credit history can be as detrimental as having a poor credit history. Lenders assess creditworthiness based on your credit history; without it, they cannot gauge your risk as a borrower and as a result will likely reject your mortgage application.

 

#8. Not Meeting Lender-Specific Criteria

Each lender has its own set of criteria. What works for one may not work for another, for example, some lenders will have different minimum employment periods, or one lender may ignore a small recent CCJ but another will deem it outside policy. Your mortgage application might be rejected simply because you do not fit a particular lender's profile. Understanding and knowing a lender’s criteria can help here, but we recommend using a mortgage broker to help you.

 

#9. Unstable or Unverifiable Income

If you're self-employed or have a fluctuating income, proving your earnings can be challenging. Lenders need assurance of a stable income to approve a mortgage, this allows them to be certain you can make your monthly payments each month.

 

#10. Applying for Too Much

Borrowing more than you can afford is a common pitfall. Lenders assess whether you can comfortably afford your mortgage payments alongside your other expenses. Don’t get carried away with asking for the maximum amount!

 
As a bonus, you might not fall foul of any one specific issue for a decline it could be as a consequence of multiple almost issues, which a lender would view as something called risk layering. A lender may decide if you’re too risky, or the property is too risky in these circumstances and still decline to proceed the mortgage application.

 

Moving Forward After Rejection

If your mortgage application has been rejected, DON’T LOSE HOPE. Review the lender's feedback, identify the issues, and take steps to address them. Improving your credit score, saving for a larger deposit, or choosing a more suitable property can increase your chances of approval in the future. Remember, rejection is not the end of the road but an opportunity to reassess and strengthen your mortgage application for the next time. For more information on how to ensure your mortgage application doesn’t get rejected email [email protected] we’re happy to assist you on your buyer’s journey - no strings attached.

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