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Reasons Why a Bank Might Decline Your Mortgage Application

You have decided that it’s time to get on the property ladder, thought about the type of property you want, maybe even started looking through the offerings on estate agent’s websites.

Throughout, the cost implications will be on your mind and you will no doubt feel dismay and bewilderment if your mortgage application gets declined. Don’t panic – not all banks are created equal.

Bear in mind that the criteria for the acceptance of an application differs from one to another, so do not assume that it is the end of the story if you have been declined once.

Your next step will be to work out why you were declined (as this may not be revealed), so that you can approach the right mortgage lender or consider your circumstances to see what can be changed.

From the start, it is important to recognise that banks tend to catastrophise in that they assume the worst – at least when it comes to their customers! Accordingly, they do all they can to protect themselves from losing money.

Assuming that you have met the basic criteria, such as only wanting to borrow as much as the bank are prepared to lend according to your income and you have a sufficient deposit, there are a number of other issues to consider.

For example, if you are unable to prove your income or your earnings fluctuate, such as if you are self-employed, a temporary worker or on a zero hours contract, a bank will not be confident that you will be able to make the repayments every month.

Similarly, those people who already have a significant number of financial commitments can be declined as the bank will assume that a mortgage will be too much, which can result in it not being paid.

If you have previously been declared bankrupt or have any other nasties hidden in your credit history, such as county court judgements, loan or credit card application rejections or even too many credit checks, you can expect to have a mortgage application declined. A bank may assume that problems will follow you and though they can sometimes be satisfied with insurance, such as an Insolvency Act policy, they may just decline to offer a mortgage at all.

A foreign national without citizenship/indefinite leave to remain or someone who has not lived in the UK for at least three years may find it difficult to get a mortgage. Banks are not only concerned about not being able to find out enough about your history, but also of the risk of you fleeing the country and not paying the mortgage.

Similarly, if you have successfully lived ‘off the grid’ to the point where you’re not on the electoral register, a bank is likely to walk away. If they are unable to verify certain details about your background, they will not lend.

Remember that the aim of a bank is to make a profit, so they will shy away from most things that will put this at risk.

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