Mortgage applications can be rejected for a variety of reasons. Lenders reject applications due to the increased risk. The most common reasons an application is rejected are:

• Credit history
• Undisclosed information / incorrect information
• Deposit amount
• Affordability
• Employment history

Credit report

When applying for a mortgage, your credit history is the most vital element to be taken into account. The information on your credit profile is key to your application being approved. The lenders will look at your previous credit and how you have managed this, for example, any credit issues like missed payments, defaults or bankruptcy. The lender will also assess your profile for address history and CCJs.

Having a good credit score /history is a major fact in having an application approved this assesses your ability to repay a mortgage. A lower score will limit your options and may result in higher interest rates and bigger deposits.

Restoring your credit score is achievable if you pay off any outstanding debts, make payments on time, and use credit cautiously. It may take some time to rebuild your credit especially since negative information can stay reported for up to several years. With the right attitude and effort, however, it's possible to start repairing your financial record!

Being on the electoral register is important in order for lenders to confirm things like your identity and your current address, being on the electoral roll can also help improve your credit score.

Undisclosed information / incorrect information

Undisclosed information can cause applications to be rejected. When detailing your financial obligations, don't overlook any information such as childcare or maintenance payments – these can significantly influence how much you can actually afford.

It is crucial to ensure the accuracy of all data you provide. Double-check if your income matches up with your payslips as errors can be made, and verify that your current address matches with relevant documents.

Deposit

Another factor that can affect an applicant’s chances of being approved is their deposit amount. Typically, most lenders prefer a minimum of 10% upfront when purchasing a home or refinancing. This ensures that the borrower is invested in the transaction and presents less risk to the lender. However, many lenders will accept 5% deposits but you will have higher interest rates and payments available to you.

If you make a smaller deposit, you are requesting to borrow more funds and this might result in your application being denied, particularly if your other qualifications aren't ideal. Therefore, if you can continue saving money for longer, then this may improve the chances of acceptance.

Affordability

Affordability is a key element to an application being accepted. Lenders need to ensure that you can afford the monthly repayments. Lenders consider a borrower’s debt-to-income ratio, which is calculated by taking the total amount of monthly debt payments divided by gross monthly income. If the number is too high, lenders view it as a sign of risk and may deny the application.

Employment history

Lenders review a borrower’s employment history and stability when determining whether or not to approve their application. Having a steady job for at least two years or more can be beneficial; however, applicants who have recently started a new job may have difficulty getting accepted with some lenders, mortgage lenders will accept certain applications if specific documents can be provided.

Other information about your job that could affect an application includes being self employed or a contract worker. This may restrict some of the

lenders if you haven't been in this line of work long enough.

Rejected mortgage application

Finally, some lenders may ask for additional documentation or information to support the borrower’s application. Examples include unanticipated deposits or large transfers of money into their bank accounts, proof of additional income sources, and a detailed explanation of any negative items on their credit report.

Overall, there are many reasons why a mortgage loan application can be rejected. To increase the chances of being eligible, applicants should strive to maintain a good credit profile, have sufficient income, and demonstrate financial stability. Additionally, being prepared with additional documentation or explanations for any discrepancies can help ensure the mortgage application is accepted. 

 

In conclusion, the approval process for a mortgage loan application can be lengthy and complicated. It is important to understand why applications may be rejected so that you can make the necessary adjustments to increase your chances of being accepted. By taking these steps, applicants will have a better chance of successfully obtaining their desired loan.

If you’re considering buying a house in Liverpool, contact us for further advice by visiting our registered office in Liverpool, by calling 0151 662 0188, or by emailing us at [email protected].