There are a number of reasons why your Mortgage Application could have been declined. Some of those reasons are easy to overcome, others less so. Below I will cover off the main reasons individually, although this is not a definitive list.
Credit Score
This is a really simple one to explain. When you submit an application, most lenders score your application. That score is generated by taking the information from your application and your credit report, merging them together and scoring it. Quite simply it either passes or it does not. It does not use the score you may have come across on your credit file, that number is completely irrelevant and not used by anyone, at best it is an indication.
However, it is possible to get different outcomes by making some slight tweaks to an application. If your application has been declined at credit score stage, making one or 2 alterations can alter the outcome. This only really works where you were a borderline application to begin with and it is usually better to look for an alternative lender.
Criteria
Again, another simple one and something that you would expect to get picked up prior to applying if your application was submitted by an experienced Mortgage Broker. There are some slight exceptions to this where the criteria is not published but any quirks in the case should be discussed with the lender prior to applying.
Affordability
Another issue resulting in a Mortgage Application been declined is Affordability. This luckily is one where it can be checked prior to making an application. The most common mistake we come across under affordability is where the applicant or broker has used 100% of their income on the application but the lender only accepts maybe 50% of some types of income. A prime example here could be bonuses/overtime/benefits, lenders treat this differently and may not necessarily use the full amount – anything other than basic annual income should always be checked prior to making an application or doing a Decision in Principle so that you know you are entering it in the same way as the underwriter will be assessing it.
Undisclosed
Occasionally lenders will not disclose the reason for a decline. This could be for a number of reasons. It could be as simple as “Company policy” through to Underwriters discretion or something more sinister such as inconsistencies in paperwork.
It is difficult when the lender will not provide anything to work off as it does not help with any future applications. Thankfully this does not happen too often through brokers as we tend to have Account Managers at the Mortgage lenders who can usually provide some guidance and point us in the right direction.
Combination
This is always a tricky one. It could be a case of you having a quirky circumstances that all individually fit criteria but are not ideal.
A good example could be Defaults, 0 hours contract and a small gifted deposit. Individually they are all within criteria, but when combined the underwriter has taken the view that you have no savings to put down and are relying on a gift. The deposit is maybe 5%, so the bare minimum, you have had past payment issues and your monthly income is not guaranteed.
Everything combined could mean the underwriter thinks it is just too much of a risk to accept despite the fact it passes affordability, fits criteria and passed the credit score.
How can we help?
Quite simply, we check as much o these upfront as we possibly can.
- We check criteria from scratch on every case.
- Having been going since 2013, we have a good idea on affordability, but where it is tight we check it prior to applying.
- Where there are various issues, we run them by our account managers/underwriters to get an idea on how it will be viewed before applying.
- We are used to dealing with the more complex cases and enjoy a good challenge – you can see some examples of our Success Stories here.
If you are unsure whether or not you can obtain a mortgage following a previously declined application, get in touch. We have many customers who have previously used different brokers or gone direct and been declined where we have been able to help.