1 in 3 borrowers have been rejected for a mortgage. Here’s what you need to do before applying

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Getting rejected when applying for a mortgage could mean losing the home you want to buy, and make it more difficult to get a mortgage with another lender. It’s something that’s affected thousands of borrowers but there are things you can do to improve the chances of a lender accepting your application.

According to a report in FTAdviser, 32% of borrowers have been rejected by a lender on at least one mortgage application they’ve submitted in the last five years.

In a competitive property market, a delay in securing a mortgage could mean you lose your dream home, even if another would be willing to approve your mortgage. When applying for a mortgage, the lender will carry out a hard credit check. This will remain on your credit report for up to two years. Previous credit applications, particularly if there are a few close together, can be a red flag for a lender and may result in your application being rejected.

Taking steps before you apply for a mortgage can improve your chances. Here are five things to do.

1. Check your credit report

Lenders will use your credit report to assess whether to approve your application. So, it makes sense to review your report before you apply.

You may find mistakes on the report, which you can rectify, or spot what it is that may be putting lenders off. By knowing about these potential issues, you can make changes or approach a specialist lender if needed. It can take several months for changes to show up on your credit report, so it’s a good idea to take this step before you start searching for a home.

2. Review your income and affordability

Lenders will look at how affordable a mortgage will be for you. How much a lender will deem affordable will depend on their criteria and your circumstances. As a rule of thumb, you can usually borrow up to 4.5 times your annual income.

If you don’t receive a regular income, securing a mortgage can be challenging. 3 in 10 of the mortgage applicants who were rejected were self-employed. This is because it can be difficult to demonstrate your income when self-employed, so you need to ensure you have your paperwork in order. While high street lenders may not approve your application, others may.

3. Manage your credit utilisation and credit applications

If you already have some form of credit, from loans to credit cards, you should consider how this will affect the outcome of your application. Using a high portion of available credit may affect affordability, and lead to your application being rejected. This is because it suggests that you’re not managing your finances well.

You should also consider further credit applications. Like a mortgage, this will often result in a hard credit check that will be visible on your credit report.

4. Keep an eye on your budget and spending

Some lenders will also want to view your bank statements when reviewing your application. They will look at how you manage your income, so keeping a budget in mind is important. That doesn’t mean you can’t go out or spend money on treats, but make sure you don’t stray into your overdraft.

Lenders will also look out for spending red flags that could harm your application, such as instances of using payday lenders or gambling.

5. Apply to a lender that’s right for you

Finally, each lender will have its own criteria, so you need to consider whether a lender is right for you before you apply. You may be familiar with the high street mortgage lenders, but there are many more without a high street presence. It can be difficult and time-consuming to understand which ones suit your situation. A mortgage broker can help you identify the lenders that are most likely to approve your application.

What should you do if a lender rejects your mortgage application?

If you apply for a mortgage and it’s rejected, don’t panic. It doesn’t automatically mean you can’t buy a home.

Don’t jump straight into applying for another mortgage. Instead, take a step back and assess why it was rejected. There may be something you can do to boost how attractive your application is. It can also help you choose a lender that is more likely to say “yes” to your mortgage application. We’re here to help you throughout the process, from choosing a lender to organising your paperwork. Please contact us to talk about your mortgage.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home maybe repossessed if you do not keep up repayments on your mortgage.


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