If your mortgage application has been declined, or you’re worried about getting a mortgage, you’re not alone. It’s common, especially for first-time buyers. To give you the best chance of success, it’s important to understand how mortgage lenders make their decisions.
Poor credit, high debt, low income, or failing affordability checks are common reasons for a mortgage application to be declined. Your deposit, job stability, and the type of property you wish to buy also influence the lender’s decision.
The good news is that one rejection doesn’t necessarily mean you can’t get a mortgage. It may be a case of approaching another lender, looking for a more specialist mortgage, or making some adjustments to your finances before applying again.
In this guide, we’ll look at the most common issues with mortgage applications and give some advice on what you can do to improve your chances.
If you have concerns about your ability to afford a mortgage, talk to the experts at YesCanDo Money. We will review your circumstances and provide honest recommendations on how much you may be able to borrow and which lender is most likely to approve your application. Contact us today for an informal chat.
Common reasons that affect getting a mortgage
When it comes to approving mortgages, lenders are guided by one thing: risk. Their main concern is whether you will be able to make the mortgage repayments, which is why they delve into your finances and run credit checks.
Here are the most common reasons that UK mortgage lenders decline mortgage applications:
High risk – could be a reason alone to be declined
- A poor credit score or a bad credit history
- High debt-to-income ratio
- Use of payday loans or other short-term borrowing
Medium risk – depends on your overall situation
- A low deposit or not meeting the minimum deposit
- Irregular or self-employed income
- Too many recent credit applications
Lower risk – may contribute to your application being declined
- Not being on the electoral roll at your current address
- Errors on your credit report or missing details
In many cases, you can improve upon or work around these issues with the right advice.
Understanding your mortgage eligibility
When it comes to getting a mortgage, lenders don’t just look at things in isolation; they consider your overall situation. Their affordability checks include your credit history, income, spending and other factors, as follows.
Your credit history
One of the first things lenders check is whether you have credit issues or have had any in the past.
They check your credit report to see what existing credit agreements you have and whether there are any red flags, such as missed payments (especially mortgage arrears) or County Court Judgements (CCJs).
A strong credit score helps, but it’s the overall story in your credit file that matters. Even with poor credit, there may still be options, especially with specialist advice from a mortgage broker.
If you’ve never used credit, that can also be a problem, as the lender doesn’t have any evidence as to how you manage debt. Building a small, positive credit profile before applying for a mortgage can actually improve your chances.
If you’ve had more serious credit issues, such as bankruptcy, an Individual Voluntary Arrangement (IVA), or a debt management plan, these will significantly narrow your choice of lender. Most high-street lenders won’t consider applicants with a recent bankruptcy or IVA, but specialist bad credit lenders will, particularly once the issue is several years in the past and you’ve rebuilt your credit. The longer it’s been since the issue was resolved, the more options you’ll have.
Your deposit size
Your deposit plays a big role in mortgage approval and the deal you’re offered. Generally, a larger deposit reduces the lender’s risk and gives you access to more deals and a higher chance of approval. It can also improve the mortgage rates you are offered, which can significantly impact your monthly repayments.
That’s not to say that if you have a low deposit, you can’t get a mortgage. Many lenders accept a minimum deposit of 5%, and some specialist schemes go lower, but a 10% deposit or more gives you access to a wider range of deals and better rates. However, always be aware that while a lower deposit can help you get on the property ladder sooner, it comes with higher mortgage rates and stricter criteria, so it’s important to get professional mortgage advice.
Your debt-to-income ratio
Your debt-to-income ratio is simply the percentage of your monthly income that goes toward paying off debt.
This includes credit commitments like:
- Credit cards
- Car finance
- Personal loans
- Overdrafts
A high debt-to-income ratio can be off-putting for lenders, even if you have kept up repayments. While there is no fixed threshold, most prefer a debt-to-income ratio of 35%–40%.
Check your debt-to-income ratio with our handy tool
Recent large purchases
Your spending habits matter in the lead-up to applying for a mortgage. If you make a big purchase, such as a car, in the 12 months before, it can increase the lender’s perceived risk. So keeping your finances steady before applying is the safest approach.
Your income stability
When considering how much to lend, most mortgage providers start with an income multiple, often around 4.5 times your income, though some lenders will go higher in certain circumstances.
But they’ll also look closely at your outgoings and your spending habits to be confident that you can make the mortgage repayments. Regardless of your salary, if too much is going out every month, it can flag you as a risk.
Your employment stability
A stable income gives lenders greater confidence. So, if your job and earnings are consistent, your application is usually more straightforward.
Many lenders prefer applicants who have been in their job for at least 3-6 months, as this demonstrates employment stability, which is crucial for mortgage approval.
If you’re self-employed, this doesn’t mean you can’t get a mortgage. But you will need to provide more evidence of your income, like bank statements, tax returns and company accounts. Knowing which lenders to approach is important, as some specialise in self-employed mortgages.
Your age
Your age can affect both whether you get a mortgage and how long a term you’ll be offered. Most lenders set a maximum age at the end of the mortgage term, typically around 70-75, though some specialist lenders go up to 85 or beyond.
If you’re an older borrower, this means you may be offered a shorter term, which pushes up your monthly repayments. Younger applicants don’t face age restrictions in the same way, but those under 21 may find their choice of lender slightly narrower.
If you’re nearing retirement, lenders will also want to understand your retirement income to confirm you can afford the mortgage once you stop working.
Your residency status
If you’re not a UK citizen, your residency status can affect your mortgage options. Most high-street lenders prefer applicants with permanent UK residency or settled status. If you’re on a work visa or other time-limited visa, your choice of lender may be narrower, and some will want to see a minimum length of UK residency or remaining time on your visa.
This doesn’t mean you can’t get a mortgage. Specialist lenders work with visa holders and foreign nationals, and a mortgage broker can point you to the right ones.
Property factors that affect mortgage approval
Your finances, job and spending aside, your chosen property may also affect your mortgage application. Here’s how.
Property valuation issues
All lenders carry out a property valuation to confirm the home is worth the amount you want to borrow and is suitable security for the mortgage. If your chosen lender values a house lower than the agreed purchase price, they may reduce how much they’re willing to lend.
That can leave you needing more money to cover the difference, or force you to renegotiate.
Non-standard properties
Some homes are considered higher risk, particularly those with non-standard construction, for example:
- Timber-framed homes
- Concrete prefabs (e.g. post-war prefab homes)
- Steel-framed homes
- Thatched roof homes
- Listed or historic buildings
- Converted buildings (e.g. barns, offices, churches)
- Flats above shops or commercial premises
- High-rise flats
- Unusual or eco builds (e.g. kit homes, log cabins)
Most of these aren’t impossible to finance, but you will definitely have a narrower choice of mortgage lenders.
Property location
Location matters to lenders because it affects how easy the property would be to sell if needed, which in turn influences how much risk they’re taking on. They will also want reassurance that it can be insured, so factors such as flood risk, proximity to commercial areas, and local council planning applications all shape their decision.
A note on mortgage lenders’ criteria
Every lender works to its own criteria, which is why one may decline your mortgage application while another accepts it. They all have their own way of carrying out affordability assessments and have different appetites for risk. Some are stricter on credit, others focus more on income or the type of property.
So finding the right kind of lender matters, especially if you have bad credit, a lower deposit or are self-employed. Working with a fee-free mortgage broker is a wise move, as they can recommend the most appropriate lenders without you incurring extra cost.
4 ways to increase your chances of mortgage approval
If you’re looking to get approved for a mortgage in the next couple of years, taking the following action can make a real difference:
1. Improve your credit score
Start by checking your credit report and fixing any errors.
Reduce your debt where you can, make payments on time, and limit new borrowing in the lead-up to applying for the mortgage. In particular, avoid payday loans as these worry lenders.
If you’ve never had any credit, then it’s worth building up a modest credit history to show lenders that you are a responsible borrower. If you’re new to the UK, this is particularly important.
2. Build your deposit
While most first-time buyers are eager to get going, sometimes saving for a larger deposit is the best option. Not only will it widen the number of lenders available and improve your chances, but you may also unlock better interest rates and monthly mortgage repayments.
3. Do your admin
It’s important to register on the electoral roll at your current address to help lenders verify your identity.
In the run-up to applying, ensure you file your bank statements and payslips carefully so you can access them easily when the time comes, as any gaps can cause delays.
If you’re self-employed, keeping records is essential. This includes a good set of company accounts and historic tax returns to prove your income.
4. Get professional advice from a mortgage broker
If you’re feeling apprehensive or doubtful about getting a mortgage offer, getting professional advice is a positive first step.
An independent mortgage broker like YesCanDo Money can help you understand your eligibility and how much you could borrow.
Contact us for mortgage eligibility advice today
With access to 90+ lenders and deep industry experience, our friendly advisers can match you with the right lenders and mortgage products for your circumstances.
Our services are fee-free, and our advice comes with no obligation. So why not take advantage of our expertise and move one step closer to the property ladder?
Contact us today for a friendly chat, and let’s take it from there.
If you want to explore your options beforehand, use our helpful mortgage affordability calculator
Frequently asked questions about being declined for a mortgage
On what grounds can you be refused a mortgage?
When a mortgage is declined, it’s usually because the lender has doubts about the borrower’s affordability. A poor credit history, unstable income, and a high debt-to-income ratio are all perceived as risks, but they are not always insurmountable. That’s why seeking professional advice on how to get a mortgage is important.
Are mortgages declined often?
Mortgages are declined regularly, and it doesn’t mean you won’t be accepted elsewhere. Different lenders have different criteria, so it’s important to know which ones to approach in your circumstances. That’s why working with a mortgage broker is advantageous. Not only can they point you in the right direction, but they can save you a lot of time and hassle.
What property can’t you get a mortgage on?
Generally, properties with major structural problems, legal issues, or certain types of non-standard construction, such as timber frames, are harder to mortgage. Those in an undesirable location can also be harder to mortgage, if the lender decides it might be hard to sell.
Can I get a mortgage if I’ve been bankrupt or had an IVA?
Yes, but your options will be more limited. Most high-street lenders won’t consider applicants with a recent bankruptcy or IVA, but specialist bad credit lenders will. The longer it’s been since the issue was resolved, the more lenders will consider you. A specialist mortgage broker can match you with the right lenders for your circumstances.
Can I get a mortgage on a visa or as a foreign national?
Yes, though your choice of lender will be narrower. Some high-street lenders will lend to applicants with permanent UK residency or settled status, while specialist lenders work with visa holders and foreign nationals. The type of visa you hold and how long you have left on it can also affect your options.
Is there an age limit for getting a mortgage?
There’s no fixed upper age limit, but most lenders set a maximum age at the end of the mortgage term, typically around 70 to 75. Some specialist lenders go up to 85 or beyond. Younger applicants generally don’t face age restrictions, though those under 21 may find their choice of lender slightly narrower.
