After waiting years to buy your dream home, it can be a disheartening experience to have your mortgage declined.
However, declined mortgages can be fairly typical, and there can be several reasons why your mortgage is rejected in the first place. The reasons behind the decline will determine how long you need to wait before you can reapply.
In today’s article, we’ll examine why your mortgage might have been declined and how long to wait after mortgage declined before reapplication.
Let’s get started.
Table of Contents
Reasons Why Your Mortgage Application Could Be Declined?
In the majority of cases, mortgage applications are declined simply because of a mismatch between the lender’s requirements and the borrower’s needs.
An expert mortgage broker can help in this situation by matching you with the right lender and flexible criteria.
However, there are some common situations in which mortgages might be declined due to some problem on the borrower’s end. Some common issues include the following.
1. Poor Credit History
A bad credit history is the most common reason for declined mortgages, as most lenders will immediately decline applicants with bad credit ratings.
Some lenders might be willing to allow the application, but you’re more likely to get unfavourable terms in these cases. Usually, this is picked up when an initial decision in principle is run.
2. Affordability Problems
Sometimes, mortgages are declined because the borrower doesn’t have enough income to afford the mortgage.
This is known as a “declined on affordability”; sometimes, borrowers with complex income streams are rejected by lenders who fail to get a consolidated picture of their income.
3. Deposit Problems
Most lenders will reject applications when the borrower fails to put in a deposit of at least 10%, while others have even higher deposit requirements.
In case of a decline due to deposit issues, you can work with your mortgage broker to find a lender who offers better LTV ratios, or you might even reapply through a government scheme if this is suitable for your circumstances.
Another common issue in relation to deposit, includes the lender not being able to accurately verify the funds that are being used as part of the deposit.
4. Overdraft Issues
If a borrower is in overdraft, lenders often see this as a symbol of financial instability. Overdraft issues can be resolved by switching lenders with more lenient lending criteria.
5. Existing Debt
If a borrower already has significant outstanding debt and the lender decides they can’t afford the mortgage repayments, they might reject the mortgage.
Sometimes, payday loans and gambling debt are also considered reflections of poor financial management.
Apart from these financial issues, mortgage loans might also be rejected sometimes due to issues other than financial problems, such as not being on the voters roll, not having a UK bank account, or even having spent less time living in the UK than the required threshold.
What To Do After Your Mortgage Is Declined?
As mentioned, mortgages are declined commonly, and in most cases, the issues can be resolved quickly with a bit of help from an expert mortgage broker.
However, for most borrowers, the urge to reapply immediately after the mortgage is declined becomes overwhelming. We recommend you don’t succumb to this tendency.
While it is a natural reaction to a declined mortgage to reapply immediately, it’s in your best interests not to do so and give careful consideration before submitting your next application.
Repeated mortgage applications within a short time can negatively impact your credit score and pose problems in the future.
Instead, we recommend you wait for some time before reapplication and take the advice of an expert mortgage professional who can guide you.
How Long Should You Wait After A Mortgage Is Declined Before Reapplication?
To be honest, there’s no fixed answer to this question, as it all depends on how fast you can resolve the issues that led to your application being declined in the first place.
Depending on the severity of the problem and how fast it can be resolved, this time can range from a few weeks to several months.
In this case, it’s vital to ensure that you’ve identified the root cause of rejection first. Otherwise, your next application might also be rejected for the same reason. So, it’s best to rectify your application before reapplying and putting in the required time.
Frequently Asked Questions (FAQs)
1. What are the different stages when a mortgage can be declined?
Long story short: A mortgage application can be declined at any stage before you receive a Mortgage Offer. If the lender has cause for concern that you’re not meeting their criteria or if the lender suspects fraud, the application can be denied by the underwriter or due to an unsatisfactory mortgage valuation.
Additionally, the application can also be denied Post Offer for certain factors, such as again if the lender suspects fraud or there has been a material change to your circumstances since the Mortgage Offer has been granted
2. Is it possible to appeal against the lender’s decision to decline a mortgage application?
Yes, you can appeal to the lender to reevaluate your application in case of a decline. Of course, you’ll need to clearly state why your mortgage should be approved in the appeal. Also, whether the lender agrees with the appeal is their decision.
3. Can I apply for a mortgage without a broker?
Yes, you can. However, having a broker by your side will help you navigate the complex waters of mortgage approval and also help if your mortgage is declined for some reason.
Expert brokers also have ties with several lenders and can evaluate your unique financial situation to suggest the best lender and mortgage plans.
Our goal is simple – to provide most up-to-date and accurate mortgage information to make your mortgage journey as stress-free as possible. Have a question? Fill up the quick form and one of our mortgage advisor will connect with you.
