Offer Accepted On House But Mortgage Declined

Buying a house requires multiple levels of negotiations between the buyer and the seller before they can come to an agreement.

However, buyers also need to start the mortgage approval process during these negotiations, as it is usually complex and can take quite some time. 

Also, there’s the risk of the mortgage being declined during negotiations which might be a huge setback.

In this article, we’ll take a look at what happens when the seller accepts your offer, but the mortgage is declined. 

Let’s get started.

Offer Accepted On House But Mortgage Declined Meaning

First, let’s examine what “Offer accepted on the house, but mortgage declined” means.

When the seller and buyer agree on the proposed price of the house and the terms of the sale, this essentially means that the offer on the home is accepted. 

Acceptance of the offer is an important step in the house-purchasing process, as it indicates the finality of the agreement. However, as mentioned above, reaching this stage can take significant time.

A mortgage declined means that even if the seller has accepted your (the buyer’s) offer on the house, the lender rejected your mortgage application for the property. 

This is common, as lenders can reject the mortgage application at any stage.

This places the buyer in a complicated situation: you’ve secured the agreement to buy the property but don’t have the means to finance the purchase. 

Moreover, this can lead to complications as the buyer might need to ask the seller for more time, which they might not agree to.

Reasons Why A Mortgage Application Might Be Declined

A mortgage application can be declined for multiple reasons at any stage of the process, as the lender is entirely within their rights to back out in case it suspects any cause for concern.

Let’s try to understand some factors that can lead to mortgage rejection.

1. Credit History Concerns

A low credit score or patchy credit history can prevent a lender from withdrawing from the mortgage application process. 

Lenders rely on credit scores to determine whether the borrower can repay the loan, and low credit scores can lead to rejections.

Problems such as missed payments, defaults or high levels of existing debt can also impact your application. 

So, ensure your credit scores and reports are in order before applying for the mortgage.

2. Affordability Issues  

Lenders usually conduct affordability assessments to understand if a borrower can repay the loan they are taking. 

This includes a detailed assessment of the borrower’s earnings and liabilities, also known as the debt-to-income ratio. 

The application might be declined if this ratio exceeds the lender’s threshold.

3. Property Valuation Problems

Lenders also perform a property valuation to understand if the property’s value matches the mortgage amount. 

In case of any discrepancy between these two, lenders might consider this as a cause for rejection.

4. Employment Issues

The kind of employment a borrower holds is also essential for lenders to understand income stability. 

Lenders might be reluctant to approve the loan if the borrower doesn’t have steady employment or has switched jobs recently. 

Lenders usually look for at least two years of stable employment before approving a mortgage.

5. Sudden Financial Changes

Sudden financial burdens, such as payday loans, medical expenses or job loss, can also lead to an application decline. 

Lenders usually view such events as signs of financial instability and might back out. So, it’s vital to maintain a stable financial profile before looking for a loan. 

Steps To Take After Mortgage Decline

When your mortgage application is declined, it’s vital to stay patient and positive and not take any hasty steps such as immediate reapplication. 

If you reapply without addressing the cause of rejection in the first place, this will lead to another rejection, which might not reflect well on your credit report.

So, this is when you need to take a step back, relax, and review the reasons for the rejection.

If required, get the help of an experienced mortgage broker, address the issues present in your application, and reapply when you’re fully confident of acceptance.

Frequently Asked Questions (FAQs)

1. How common is it for a mortgage to be declined after offer acceptance?

It’s not very common, but can definitely happen. Even if an offer is accepted, financial factors may change at the borrower’s end, which might result in the lender rejecting the mortgage application.

 2. Is negotiating with the seller after a mortgage decline possible?

Yes, it is possible. In such cases, make sure you communicate everything clearly to the seller, and explain your situation. They might be open to extending the timeline or considering other arrangements to finance the purchase.