Why mortgage lenders turn you down

If you're planning to apply for a mortgage, make sure you get accepted. We reveal the main reasons why mortgage applications are declined so you can be prepared.

You can't afford it

When you go to see a lender or a mortgage broker, they will do an affordability assessment based on the deposit or equity you have available and how much you spend each month on everything from gas and electricity bills to your mobile phone, student loan repayments and eating out.

If the sums don't add up, you won't be able to get the mortgage you want. 

The bigger your deposit, the better the mortgage deal you’re likely to receive – simply because you don’t have to borrow as much money from the lender.

If you only have a tiny deposit for your mortgage and you need to borrow a large sum from your lender, you may get turned down as the lender may be concerned you'll be unable to keep up with your monthly payments (particularly if your monthly earnings are not much more than your monthly mortgage payments).

So, it’s well worth taking the time to save up as much as you can before you rush into applying for a mortgage.

You've got no credit history

You may think that never applying for any kind of credit is a good idea. After all, why waste your time getting into debt with a credit card unless you really need to?

But this can work against you.

That’s because when you come to apply for a mortgage – which is also a form of credit – you may find lenders are reluctant to accept your application due to your lack of (or rather, non-existent) credit history.

This means lenders have no record of whether or not you’re good at keeping up with your payments and as a result, they may decide not to lend to you.

To avoid this issue, it can help to build up a credit history by using a credit card – providing you always pay it off in full and on time.

The best credit cards if you have a bad credit history

You've made too many credit searches

When you’re applying for a mortgage, be wary about getting too many quotes.

You should check whether or not the lender will be running a credit check on you and if they are, you might want to reconsider.

Too many credit searches in a short period of time can adversely affect your credit score as it can make you look risky to lenders and it is sometimes interpreted as a sign of fraud.

So, don’t make multiple applications for multiple deals. You’re much better off doing your research – potentially using a mortgage broker – choosing one deal and then applying for it.

If you do get turned down, don’t rush off to apply for several other mortgage deals as this will only make things worse.

Credit score need improving? Try these tips

The property is situated above shops

Another important reason for doing your research before applying is that individual lenders have different rules.

This can be especially important if the property you're looking to buy is situated above shops, or near commercial property of any kind.

This is because they're deemed harder to re-sell down the line, which is enough to put some lenders off altogether.

Thankfully, some are still willing to lend, so chat to your broker or enquire about a specific lender's criteria before applying. 

You're not on the electoral roll

If you’re not already on the electoral roll, get on it. Lenders use it to check that you live where you say you do.

So, if you’re not on it, this could affect whether or not you get accepted for your mortgage. Registering on the electoral roll is free. You can do it online at the About My Vote website.

It also bodes well if you have stayed at the same address for a number of years as lenders prefer stability.

You're self-employed

If you’re self-employed it can be harder to get accepted for a mortgage because your income can be less stable. That means lenders may be worried you won’t be able to keep up with your monthly payments.

That’s not to say you can’t get a mortgage if you are self-employed.

You can boost your chances by proving you have regular paid work and by ensuring your credit rating is squeaky clean.

However, you may need to wait for your business to establish itself over a couple of years or more before you apply for a mortgage.

Meanwhile, if you’re planning to become self-employed in the near future, it’s worth getting a mortgage (or remortgaging) beforehand!

You've got too much debt

When deciding whether or not you can afford a new mortgage, lenders assess how much outstanding debt you already have.

What’s more, some lenders even assess how much debt you could have if you maxed out on all your credit cards and overdrafts – even if you haven’t actually done so.

So, if you have any dormant accounts or credit cards you no longer use, it’s well worth closing them.

And for those credit cards and overdrafts you do still use, ensure you keep up with your monthly repayments – and try to pay more than the minimum monthly repayment.

This will reduce the amount of debt you have and will increase your chances of getting a mortgage.

It’s also worth stressing if you’ve had a payday loan, this stays on your credit file for six years – even if you’ve already paid it off (and on time).

While this will be taken into consideration by the lenders, it won’t necessarily mean you’ll be turned down for a mortgage.

Debt troubles? Here's where you can go for free debt advice

You've had financial difficulties in the past

Generally, bad credit will follow you around.

Lenders will be able to see things like missed payments and County Court Judgments (CCJs) against your name and bankruptcy orders, on your credit rating for six years, and this can have a big impact on whether or not you get accepted for a mortgage during that period.

In the meantime, if you want to boost your chances of being accepted for a mortgage and you already have some form of credit, ensure you always make payments on time and keep within your credit limit.

And if you’re in a lot of debt and you’re struggling, make sure you speak to someone about it. You can get debt advice free from places such as StepChange and Citizens Advice.

They will provide guidance on a range of options to suit your personal needs and help you with your debt problems.

Get advice

Finally, don’t forget, if you are looking for a mortgage, it’s well worth speaking to a mortgage broker.

This guide aims to give information, not advice. Always do your own research and/or seek out advice from a regulated broker before acting on anything contained in this guide.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.