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Many people apply for a mortgage and end up asking “why would I be refused a mortgage”, when their application is refused. Today’s reality is that most potential homebuyers need to buy a house on credit rather than paying upfront. To own the home of your dreams, you’ll need to apply for a mortgage and have your application accepted. However, research indicates that one in five applicants for mortgage financing are refused.

This statistic can be overwhelming, as well as frustrating for some. But it doesn’t mean that the journey towards owning a property is over. Mortgage specialists aim to find individualised solutions to obtaining a mortgage, regardless of bad credit.

We’ll discuss why would I be refused a mortgage, reasons why a mortgage is refused and what happens if you are refused a mortgage including steps you can take to increase your chances of being approved for one.

Why would I be refused a mortgage?

Each lender has its own means of assessing the likelihood of granting you a mortgage, and this assessment process is based on several factors. They’ll look into your credit report, which includes the history of a borrower’s credit activity and current credit situation. This information is based on data collected from banks, credit bureaus, governments, and collection agencies.

Gauging from your credit report, lenders can determine how likely you are to meet payment obligations. Lenders won’t only be paying attention to your financial situation at the moment, but they’ll also take into account how possible it will be for you to make payments as interest rates go up.

Reasons why a mortgage is refused

Most often, the reason why mortgage applications are refused is that they’ve gone to the wrong lender and haven’t sought out advice from mortgage specialists.

Below we look at just a few of the most common reasons why people have been refused a mortgage:

  • Income and affordability issues: this is often the case when lenders are sceptical about your income means, or you have a low income compared to the loan you are applying for.
  • Bad credit: if your credit score is low, lenders might not be eager to loan you money. Your score indicates that you might not be a reliable lender.
  • Too much debt: if your debt continues to grow and you cannot make payments, you’ll be seen as a risky investment in the eyes of lenders.
  • Late or missing payments: your payment history is revealed in your credit report, and it’s not a good sign to miss payments or have late payments.
  • Too many credit applications: this refers to how many credit applications you’ve made in the last six months.
  • Deposit requirements: lenders generally require you to have enough funds to pay for 10% of the deposit; anything lower and you might be declined.
  • Refused mortgage due to gambling: if you have a history of gambling, you’ll be viewed as a risk, which will result in lenders rejecting your application.
  • You can’t prove a consistent income: while self-employed mortgages are granted, lenders might be sceptical of fluctuating incomes and contract work.

What happens if you are refused a mortgage

It’s beneficial to know that being denied by one lender, doesn’t mean that you won’t be approved by the next. Refused mortgages happen all the time, but there are steps you can take to ensure your next application is successful.

1)    Look into your credit score

Having a good credit score is one of the best ways to ensure mortgage approval. Understandably, most people sit in the ‘fair’ category when it comes to credit scores, yet there are ways to improve your credit score over time, like paying off debts, closing accounts and avoiding future credit.

Reapplying for mortgages can have an effect on your credit score, which is why it’s essential to take your time with each application and understand your financial situation in its entirety.

2)    Find out why you were refused

Knowing where you went wrong will put you in a situation where you can avoid the same mistakes. Lenders might not be too keen on sharing the information with you, but it is worth a try.

3)    Get the right advice

We’re all professionals in our own fields, but unless you’re a lender or mortgage specialist, you will struggle to understand how to secure a mortgage approval and how to avoid rejection.

Sourcing expert help can assist in reclaiming control of your plans. Not only that, but experts have a deeper understanding of lender companies, so they know how best to approach situations.

4)    Reapply with consideration

When it comes to applying for mortgages, you can’t just go to anyone. Instead, take your time by researching lenders and understanding the correct processes and requirements.

Another reason why mortgages can be refused is because of errors in applications. To avoid this, take time with each application and if possible, get it professionally reviewed.

How long should I wait to apply for a mortgage after being declined?

Don’t reapply for a mortgage straight away. It’s only natural that you’d want to speed up the process and source a new lender as soon as possible, but going to another lender without assessing why you’ve been declined isn’t going to work in your favour.

Contact us

If you’ve been refused, speak to an ams: specialist to successfully find solutions and determine reasons why a mortgage is refused. Contact us at 0121 4000 052 or visit our website to understand “why would I be refused a mortgage” and what steps you can take next. At ams: we specialise in helping individuals overcome mortgage challenges. Our expert team can provide valuable insights into what happens if you are refused a mortgage next and the actions to take. Don't let a refusal stop you from achieving your homeownership dreams.