It’s often said that buying a house can be one of the biggest sources of stress you can have in life, which probably explains why a recent MoneyWise report suggests a quarter of all borrowers find the mortgage application process stressful.
It’s hardly surprising, when you think about it – after all, you’ve made the commitment to move – possibly to the house of your dreams – and you’ve invested time and, probably, some money in the process. By the time you’re applying for a mortgage, you’re likely to be emotionally invested in the outcome.
Many, if not most, are approved – on average around 65,000 a month, yet because different lenders adopt different criteria, and because the common lending criteria imposed on all regulated mortgage providers is now stricter than it was before the 2008 crash, it’s hard to be 100% sure your application will be agreed.
So, whether you’ve managed the process yourself or you’ve used a broker to put the application together, what can you do if the worst happens and your mortgage application gets declined?
Here are some ‘dos and don’ts’ and some tips to try to make sure your next application is accepted.
#1 – Don’t panic!
We can’t stress this enough. There are many reasons why your application might not have made it through the lender’s assessment. The most common is that you’ve failed to meet the lender’s own criteria. That doesn’t mean you won’t meet the lending criteria for another bank or building society, though, because as we’ve already said, each lender uses a different scoring system to assess risk and liability.
Also, some banks and building societies may specialise in lending under circumstances that others won’t. Take a moment to breathe.
#2 – Don’t immediately apply to another lender
Because you don’t know why your application has been declined, you don’t know whether the problem is something that needs to be addressed for all lenders or whether it’s just been an issue for that bank or building society in particular.
Multiple failed applications may show up in your credit history, making it even harder to get your mortgage application through the next stage. So don’t act in haste.
#3 – Talk to a mortgage broker about your options
If your failed application was handled by a broker, you may feel there’s no point in talking to another one. But all brokers are different, with different experiences and different areas of expertise. It may be that a broker can review your paperwork and see an issue that hadn’t been obvious to your previous broker.
If you managed your declined application yourself, it could be that you’ve made a simple error or omitted some key information without realising it. Any reputable mortgage broker should be able to spot this and potentially get you back on track.
#4 – Do your homework (or make sure your broker has done theirs)
Having an Agreement in Principle – where your mortgage is approved based on basic information and subject to a full application and review – is always going to give you a better chance of your full application being accepted.
If you’re declined even though you’ve had the AIP, it could be for one of a number of reasons.
It’s possible a more thorough credit review has turned up an undeclared adverse issue, for example. Or it may be that you’ve applied to a lender who, based on a deeper understanding of your circumstances, was never going to lend to you in the first place. Maybe you’ve changed jobs unexpectedly and didn’t know your proposed lender’s policy was to only accept applications where the applicants had been in the same job for 12 months or more.
There are lenders out there who will accept applications from borrowers with poor credit, CCJs or who have been in their job for a short time or face a range of other challenging circumstances – and as long as they’re aware of that up front and the application is managed properly, there’s a good chance you can still get your application accepted by applying to the right lender.
#5 – Ask the lender to explain why they declined the application
For reasons which are understandable, some lenders can prove difficult to pin down on this. If it’s to do with something in your credit history then their access to the detailed data can be limited, even if they were inclined to share the information with you. At this point, they may point you in the direction of your credit score.
But it’s important to know whether you were declined because of an adverse credit event or because you didn’t meet their policy in some other way, so it’s always worth you or your broker pushing them on the reason – it may be the clue that helps you to resolve the problem.
While you may be anxious about the prospect of your application being declined, you shouldn’t spend time worrying that a ‘no’ is the end of the road. With specialist help and advice from an advisor who knows the mortgage market well, even applications that may look like they’re dead in the water may be able to be rescued.
To find out more about our friendly and professional mortgage service, fees and what we can do to help make sure you’re not paying over the odds for your mortgage, why not visit www.oportfolio.co.uk or give us a call on 020 7371 5063.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.