10 Things That Can Stop Your Mortgage Application Being Approved

When trying to buy a home, you may wonder what can stop you getting a mortgage. Obtaining a mortgage is a big step towards home ownership and at Financerate we want you to be as informed as possible, so this intimidating process goes as smoothly as possible. 

So let’s improve your understanding of these factors, and enhance your chances of securing a mortgage to buy a house. Here are ten common factors that could potentially prevent your mortgage from being approved.

What can stop you getting a mortgage? Credit score matters!

Your credit score plays a pivotal role in mortgage approval. Lenders use it to assess your creditworthiness, payment behaviour and your ability to manage debt responsibly.

Things such as delayed payments, defaults, or maxed-out credit cards can lower your score and trigger concerns for mortgage lenders.

A low credit score indicates an inability to make timely mortgage payments. 

Mortgage lenders often have specific credit score requirements that applicants must meet to be considered eligible. Poor credit history can result in mortgage applications either being approved with unfavourable terms, like higher interest rates or larger deposits, or being declined altogether.

What you can do to help:

Try to check your credit report more regularly, address any errors, and work on improving your score if needed.

Insufficient income can prevent a successful mortgage application

Lenders assess your income to ensure you can afford mortgage payments. If your income is deemed inadequate to cover the mortgage amount, your application may be rejected. 

Being employed or having a stable income source can strengthen your application. Be prepared to provide documentation, such as pay stubs or tax returns, to verify your income.

What you can do to help:

A mortgage advisor can help you understand the specific mortgage options available to individuals with a low income. They can also provide detailed information on government home buying schemes and shared-ownership options that may be suitable for your circumstances.

Government home buying schemes, such as Help to Buy or Shared Ownership, are designed to assist low-income earners in getting onto the property ladder. These schemes provide financial assistance, such as equity loans or shared ownership arrangements, to make homeownership more affordable.

When applying for a mortgage, think about your debt-to-income ratio

Lenders evaluate your debt-to-income ratio, which compares your monthly debt payments to your income. If your ratio is too high, it might indicate that you’re stretched financially and unable to handle additional debt. Aim for a lower debt-to-income ratio to demonstrate your financial stability.

What you can do to help:

Consider clearing as many outstanding debts as possible before applying for a mortgage. This can help reduce your debt-to-income ratio and demonstrate to lenders that you have good financial management skills.

You could also seek free and confidential debt advice from resources like the Money and Pensions Service can provide you with guidance on managing and paying off your debts

Does your employment history demonstrate risk or stability to mortgage lenders?

Lenders prefer borrowers with a steady employment history. Frequent job changes or gaps in employment could raise concerns about your ability to meet long-term financial commitments. 

Lenders have specific underwriting criteria that they use to assess borrowers, and if you fail to meet these criteria, your chances of obtaining a mortgage may be hindered. One of these requirements is often employment status, as mortgage lenders prefer borrowers with a stable and consistent income.

What you can do to help:

If possible, maintain stable employment prior to and during the mortgage application process to reflect a stable income and reduced risk for lenders.

An insufficient deposit can put off mortgage lenders

A substantial deposit is often required to secure a mortgage. Most lenders require borrowers to put down a deposit as a way to reduce the risk they undertake. With a smaller deposit, lenders may view you as a higher-risk borrower, making it more difficult to secure a mortgage.

What you can do to help:

Consider saving up for a larger deposit. The more you can save, the better your chances of being approved for a mortgage. It is also worth exploring government schemes that assist first-time buyers or those with smaller deposits.

Mortgage lenders are likely to do affordability checks

Lenders assess not only your current financial situation but also how well you can handle potential interest rate increases. 

If you’re barely affording the current rate, you might struggle with future rate hikes and this could stop your mortgage from being approved.

What you can do to help:

Try to maintain steady employment and income. Decide on a current account that’s right for you to help manage your finances, reflect stability and demonstrate reduced risk for lenders. You can also consider additional sources of income, investments, or adding part-time work to any state or private pensions you may receive.

Be mindful of the property valuation when applying for a mortgage

Lenders conduct a property valuation to determine its market worth. If the property is appraised at a significantly lower value than the purchase price, it can affect your mortgage approval.

What you can do to help:

In the event of your property being appraised at a lower value, you might need to renegotiate the price or deposit to bridge the gap.

Get rid of existing debts before applying for a mortgage

Aside from your mortgage, existing debt obligations—such as personal loans, credit card debt, or car loans—impact your ability to manage additional debt. 

Lenders consider your existing financial commitments when evaluating your application.

What you can do to help:

Reducing your debt before applying for a mortgage can enhance your chances of approval.

Avoid legal issues during a mortgage application

Legal matters associated with the property, such as boundary disputes or incomplete paperwork, can delay or even prevent mortgage approval.

What you can do to help:

Ensuring the property has a clean legal record can help towards a smooth mortgage process.

Be wary of undisclosed information when applying for a mortgage

Honesty is paramount when applying for a mortgage. Failure to disclose crucial information—such as ongoing legal disputes or additional debts—can lead to application rejection. 

What you can do to help:

Be transparent with your lender to build trust and increase your approval odds.

Helping you reduce the risks when applying for a mortgage

Obtaining mortgage approval involves careful consideration of various factors. At Finance Rate, we want you to be aware of these roadblocks ahead of time. That way you can steer clear of the risks, better navigate the mortgage application process and be better informed to make yourself a more attractive candidate.

The more information you have to work with about all things finance, the less intimidating these topics can be. If you’re facing hassles with your breakdown cover or trying to get a loan for starting a business, we’re here to give you the facts.