Mortgage Declined by Underwriter: What To Do Next?

Are you panicking because an underwriter has declined your mortgage? Here’s what you need to do next.
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Finding a property and a suitable mortgage deal can be challenging. What’s harder is seeing an underwriter decline your application.

Underwriters often decline mortgages for various reasons, mainly dealing with your financial profile.

Since lenders assess applications per their criteria, if there’s a mismatch between your situation and the lender’s requirements, underwriters can decline the application.

But this is no reason to think that you can’t get the mortgage approved. Today, we will see how to address a mortgage declined by underwriter and what you can do to get the mortgage approved.

Who Is A Mortgage Underwriter?

A mortgage underwriter is a professional the lender employs to assess your mortgage application. 

Underwriters perform a detailed analysis of the documentation in your mortgage application and verify if you can repay the borrowed money. 

At the same time, they perform a complete and final check of the property valuation report to ensure that the property meets all required guidelines. Ultimately, they are responsible for deciding whether or not the lender will approve your mortgage. 

It’s important to note here that the underwriter is not the same as mortgage processors, who are responsible for requesting documents from you for the underwriter’s verification.

How Does The Mortgage Underwriting Process Work?

Soft vs Hard Credit Checks

During the underwriting process, the underwriter will review your application. They will perform a hard credit check (when a full application is submitted) and then move to an in-depth inspection of your financial status.

They will look at your credit history, current credit score, financial history, employment status, and also understand your previous debt repayment behaviours.

Next, they’ll consult with credit report referencing agencies, analyse financial documentation, and might even enquire with your employer. 

Due to the in-depth nature of this review, it’s best to be honest and upfront about all the information you’re providing. Any discrepancies can result in your application getting denied. 

On average, the entire underwriting process takes a few days to complete, though this varies from lender to lender. 

Working with an experienced mortgage advisor can help ensure your documentation is in order and speed up the process.

Why Was My Mortgage Declined by Underwriter?

Underwriters can decline mortgage applications for multiple reasons, as explained below:

1. Credit Report Problems

Types of Bad Credit

The most common reason underwriters decline a mortgage application is problems with your credit report. 

Since lenders use these reports to assess your mortgage repayment reliability, any red flags, such as poor credit scores, payment defaults, and late payments, can raise doubts.

Further, discrepancies in your credit file, such as unfamiliar transactions or credit accounts, can indicate errors or fraud, leading to an application being declined. 

That’s why it’s essential to regularly check your credit file with credit reference agencies and help rectify any issues before submitting the mortgage application.

2. Employment And Income Verification Problems

Before approving the mortgage application, lenders will analyse your income and employment status to ensure you can repay the mortgage. 

If your income is unpredictable or you have a patchy employment history with spells of unemployment, this can be a concern for the lenders. 

Moreover, inaccurate information and a failure to substantiate salary claims with documents can result in the underwriter declining the mortgage. 

3. Debt To Income Ratio

The debt-to-income ratio compares your total liabilities to your total income. If this ratio is high, you are already allocating a significant portion of your salary to debt repayment. 

This can also stand out as a risk factor to lenders. A lower ratio indicates better financial health and a higher capacity to handle mortgage repayment.

4. Discrepancies In The Property Valuation

A property mortgage valuation report will be completed along with your application, indicating the property value against which the mortgage is granted. 

In case the actual value of the property is lower than the proposed price or mortgage amount being requested, your application is liable to be rejected. 

Such discrepancies indicate a higher risk to the lender, as the property doesn’t offer sufficient security against the loan. 

5. Mortgage Application Form Problems

Errors or mistaken information in the mortgage application form can also lead to a decline from the underwriter. Possible discrepancies include but are not limited to:

  • Incomplete or unfilled sections
  • Mistakes in personal details
  • Conflicting information

Accuracy is vital when filling out a mortgage application; even minor discrepancies can lead to significant issues. So, make sure you double-check everything before submission.

How To Respond If Your Mortgage Application Is Declined By Underwriter?

Even if an underwriter has declined your mortgage, there’s no need to be crestfallen. As a response, you need to ask the lender why your application got rejected in the first place.

Always ask for specific reasons, such as problems in your personal information or credit report discrepancies.

Once you’ve identified the problem area, you can start by reviewing that particular aspect of the application in detail. 

Often, waiting for some time before reapplying for the mortgage can be beneficial, as this will give you time to correct any mistakes in the application and ensure there are no further rejections.

You can also use this time to improve your credit score or gather a larger deposit, which will help boost your chances of getting approved.

Frequently Asked Questions (FAQs)

1. Can the underwriter’s decision be challenged?

In some cases, yes, you can contest the underwriter’s decision. You might need to provide additional information, clarify existing information or provide more documents. As always, the exact process of reconsideration varies from lender to lender. In case of a rejection, make sure to communicate proactively with your lender.

2. Will a declined mortgage application impact my credit score?

A declined mortgage application does not impact your credit score directly, but multiple rejections in a short period can raise red flags. Lenders might view this as financial stress, harming future credit evaluations. That’s why it’s always best to space out applications.

3. I passed the initial credit check, but my application was still declined. Why?

The initial credit check is a soft check for preliminary verification. Once the application goes to the underwriter, a detailed check is performed, which might reveal new issues and result in a rejection.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.

George Rogers LendingLine
CeMAP & CERER Qualified Mortgage Adviser

I am CeMAP & CERER qualified mortgage adviser and have helped a number of clients realise their dreams when they thought it would not be possible. I’m skilled at getting mortgages sorted for people with a history of missed payments, CCJs, defaults, debt management programmes, IVAs and bankruptcies.

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