We speak to a lot of people who have applied for and obtained a mortgage agreement in principle and then subsequently had their mortgage application declined.
I thought for this post we could have a look at your agreement in principle might be approved but then application is declined and what you (or we) can do to help.
Reasons for declined application
An agreement in principle (aip) is exactly that, “in principle”. Many only involve a soft footprint credit check and only ask a limited number of questions. When the full application goes in there could be something in there which was not picked up.
- Information not picked up on the AIP. This could be a number of things, a nice simple example could be that the AIP asked how much your income is. The full application may then ask how long you have been in your job. If it is below their requirement, then it is easy to see why the application was declined.
- A mistake. There are 2 major types of mistakes we see which result in declined applications. The first is “undeclared debt”. It could be that you cleared a credit card recently and then did not put it on the AIP as you no longer have it. However it could be that the lender is still picking it up as the credit report has not yet updated.
- A self employed mistake. Self employed people are generally terrible with their income (sorry guys, but you are). We hear people are earning one figure but once their accountant has had a go at the figures the income is a lot lower… Your accountant is doing a good job for your tax but not so good for your mortgage application.
- Computer says no. This is sort of a catch all really. For one reason or another it is just not passing the scoring required.
Regardless of the above, its not necessarily the end of the line. There are potential options…
What to do
If we took a “no” as the end of the line every time we received one we would have a lot of customers we were unable to help.
First rule – dont panic! Honestly, we cant emphasize how important that is. Have a look at some of our Mortgage Success stories some where the customer had previously been declined, others where they were just not straight forward.
The first thing to do is to speak to the lender, find out why it was declined. Is there anything in particular? If so, can it be fixed? Was it a mistake? If so, would an explanation help? Dont give up at the first hurdle. It is not uncommon for underwriters to make assumptions or to make a decision without all of the information. That is not anyones fault. It is just a case that a little bit of communication can make the difference.
If that does not work, then speak to a broker. It makes everything a lot easier if we know what the problem is but sometimes this is not always possible. However a lot of the time once we get everything down on paper we can work out what the problem is (11 years worth of experience helps) and find a more suitable lender.
Summary
In a nutshell:
- Dont panic!
- Speak to the lender if you can, try to find out why it was declined.
- Speak to a broker.
Dont give up until you have had a second opinion. It could be very easy to overcome.