What to do if you’ve been rejected for a mortgage

If you’ve been unsuccessful with a mortgage application, your first instinct may be to try your luck with another lender. However, too many unsuccessful applications could actually have a negative effect on your credit report. It may be worth your time to stop and examine why you weren’t offered a mortgage deal in the first place, and to try to improve your chances for next time.

Why you might have been refused for a mortgage

Lenders take a range of factors into account when deciding whether or not to give you a mortgage. These could include the following:

• Not being registered to vote
  You need to be registered on the electoral roll to help the lender confirm your identity and where you live.
• Poor credit history
  Lenders may think that there’s a high risk that you won’t be able to make repayments on a mortgage if your credit history is poor. Examples of this include if it says on your credit report that you’ve missed or defaulted on payments, have County Court Judgments (CCJs) on your record, or made too many applications for credit recently.
• Debt
  If you’ve got too much debt, lenders may question whether you’ll be able to take on any more. They’ll also take any payday loans into account, as these could suggest that you’re desperate for finance.
• Affordability issues
  Affordability rules mean that lenders have to decide if they think that you’ll be able to make any mortgage repayments. They’ll try to determine, with the use of a mortgage interview, how much you earn and how much you’re going to spend. The latter could include things like future life changes that could affect your income (for example, if you’ll be leaving your job) and expenditure for things ranging from essential goods to holidays and leisure activities.
• Paperwork if you’re self-employed or a contractor
  If you don’t have a permanent income, lenders will have to check if you’ll be able to make your mortgage repayments. It’s not impossible to get a mortgage if you’re self-employed or working on contract, but you’ll need to prove your ability to pay it off.
• Deposit too small
  You may not have enough saved for the mortgage deposit on the property that you want to buy. This means that you’d have to borrow more, and lenders may not think that you’ll be able to take on that loan.
• Financial associates
  If you’re financially linked to anyone, lenders will look at their credit history too. This is because you may be liable if they’re not able to repay their loans. This could mean that you’ll be taking on new debt, which could cause problems when it comes to repaying your mortgage instalments.

Next steps

If you’ve been rejected for a mortgage, there are a few things that you might be able to do to try to improve your chances with your next application. These include the following:

• Making sure that you’re registered on the electoral roll
• Ensuring that your credit history is healthy – start by checking your credit report
• Clearing up any debt that you owe
• Being able to prove that you can afford to make your mortgage repayments
• Saving enough for a mortgage deposit
• Cutting financial links with anyone with poor credit history – this may involve closing any joint accounts you may have together, for example.

Being rejected for a mortgage can be dispiriting, especially if you’re looking forward to getting the ball rolling on your home purchase. However, it’s important to take a step back and examine how you could improve your chances with your next application.

If you’re planning on making another mortgage application, you may want to check your Equifax Credit Report & Score up to half a year before you apply. It’s free for the first 30 days then £14.95 monthly, and gives you access to your credit history, as well as how creditworthy lenders may find you.