Imagine that your lender informs you of the rejection of your approval. As you receive this notification, you may feel like thrown off the cliff thousands of feet down, leaving you hovering between life and death. The disapproval of a mortgage can slow down most of your plans and put an end to any ideas you have made. Your dream of owning a house would shatter into broken pieces of a mirror.
Undoubtedly, it is frustrating to have a mortgage turned down, but you cannot give up hope. You know very well that when you apply for a mortgage, a lender will assess your application, look over your repaying capacity, stability in your income sources, and above all your credit history.
A mortgage is such a vast amount, and a lender cannot approve it without carefully examining your affordability. There may be different reasons for the rejection of your mortgage. First off, you should identify the cause of denial of a mortgage. The most common causes include:
- You have made a late payment recently.
- You have a CCJ in the past six years. Even a settled CCJ will lead to rejection.
- You have made too many credit applications within the last three months just before the date you apply for a mortgage.
- The lender does not trust your affordability.
- You have a consistent income because you are a self-employed or freelancer or have a contract-based job.
- Your contact details are erroneous in your credit report.
- You have missed any payment shortly before you apply for a loan.
Here is what you should do when a lender turns down your application.
Do up your credit report
Most of the reasons for rejection related to the information appearing on your credit file. Whether a missed repayment has dinged your credit report or your contact details are wrong, you should immediately start improving your credit score.
If it has any default that is not in your knowledge or wrong information, you should dispute the error with credit reference agencies. It can take around 30 days to rectify the mistake.
If you have fallen behind repayments, make sure that you pay off all your dues on time now onwards. Pay all utility bills, the insurance premium on time. If you have a CCJ on your credit file, you will have to wait for six years to pass by since the CCJ appears to apply for a mortgage.
Find ways to increase your income
Affordability is the most crucial factor that a lender will take into account before signing off on your mortgage application. If your lender doubts that you will not be able to keep up with repayments, they will turn down your application.
Find ways to increase your income. However, it is better if you arrange a larger deposit size. If you put in more money as a deposit, the loan-to-value will drop down and hence the monthly repayments will be smaller and the total cost of the loan will be low.
Apply for a mortgage with a broker
If you directly approach a lender, it might be challenging to convince a lender to approve your application. Each lender follows different policy and hence it is likely that you do not meet the criteria used by the lender.
Since you do not have much knowledge about the criteria used by lenders, you should apply for it with a mortgage broker in Glasgow like Shinemortgages.co.uk. Brokers have reputed lenders on their panel, and before recommending you to a lender, they will assess your financial condition so that you get the deal that suits best to your financial circumstances.
Some borrowers get declined after the decision in principle. A mortgage in principle is an agreement to prove housing agents that you are interested in buying property, but this agreement does not bind the lender. When you confirm, the lender will make a hard credit check and find that you do not meet the criteria. If you apply with a mortgage broker, you can avoid such problems.
It is frustrating to have a mortgage rejected, but it does not mean that you cannot get it dome down the road. You need to identify the reason for rejection and work on it.