Been Rejected by Your Bank for a Mortgage? Here's What to Do Next
Having your mortgage application declined can feel like a devastating blow, but it need not be the end of your hopes of securing a mortgage eventually. There are several common reasons why any particular mortgage application might get refused, such as a poor credit history, too much other debt or you may have made too many recent credit applications.
There are a few other details as well which can lead to a rejection, such as the deposit amount you can afford or your employment status (some lenders do not favour a self-employed status). Thankfully there are measures you can take to improve your chances of securing a mortgage in the future.
Here we lay out the three main steps you should take after having your mortgage application rejected by your bank.
Use a Mortgage Broker
Using a mortgage broker is advisable even if you haven't already been rejected by your bank, though it is especially advisable if indeed you have had your first application denied. A broker will understand the market and also have insight into what criteria every lender requires before accepting a mortgage application. They will be able to identify a lender that accommodates your unique personal circumstances.
Not only will a broker search the market and compare the different deals that are available to you, they will also examine the interest rates on offer and any additional charges such as arrangement fees that might have an effect on the overall cost of the various available mortgages.
An experienced mortgage broker will have contacts at certain banks or building societies which they can call upon to help process your mortgage application quickly and efficiently. They will also have access to exclusive deals that are not available with the high street banks.
Once a mortgage has been secured, they will be able toreview your mortgage to ensure you never pay more interest than is necessary.
A broker is especially useful for anyone who has been initially rejected by their bank, as they can assess your previous application and figure out exactly what went wrong. Any issues preventing a successful mortgage application will be clearly identified so that they can be fixed, amended or worked around to ensure a better chance of success in the future.
Even first-time buyers will benefit from the expert advice on offer from an experienced mortgage broker.
Get a Credit Report
If you haven't done this already, then it is crucial that you get a credit report in the aftermath of your bank rejecting your mortgage application. A mortgage broker will likely advise you to do this immediately (if you had an application previously rejected) as it may be the one single reason why you were rejected. However, it also may not have anything to do with it. Either way, you must find out in order to know what steps to take in order to be successful with your next mortgage application.
You can check your rating at Check My File. If you have a low score, don’t worry your report will also detail ways that you can improve your credit score.
We have posted a useful guide detailing how to improve your credit score. In the meantime, here are a few hints and tips:
- Register on the electoral register
Lenders use the electoral register to check that you are who you say you are, if you are not registered, this could hinder any applications you make.
- Pay your bills on time
Missing or late payments can show up on your credit file and remain on your record for 6 years. Should you end up with a default or County Court Judgement for any unpaid bills, this could seriously affect your borrowing power, therefore keep those bills up to date by paying them on time or early, if possible.
- Keep your debt down
Keep your amount of debt down as much as you can and show that you are in control of it. Don't use a high percentage of your available credit limit. Try to keep it below 50%, the lower the better.
There are many other ways in which you can improve your credit rating; e.g.
Challenging unfair defaults
Bad credit being duplicated on your credit file
Be Mindful When Taking Out Credit
When it comes to getting approved for a mortgage, something as simple as a missed card payment can have a big impact. Just one late payment may mean you get rejected with one lender, wheras another may still accept you.
As a general rule it pays to be mindful when taking out credit cards and managing which ones you keep active.
It is not always apparent what the best course of action is as each lender is likely to have their own requirements. This is where a mortgage broker can provide guidance, based on your own activity and situation.
One thing is clear, when it comes to credit cards – don’t go over you limit! Even going over your limit by a small amount can have a detrimental effect on gaining a mortgage approval.
Don't Forget the Detail
You will also need to go through all the details of your mortgage application with a fine-tooth comb to ensure you have everything arranged perfectly. Small details can make a big difference to your chances of success, such as not being registered to vote, mistakenly using the word “flat” in your address when you live in an apartment are all small details but ones that are potentially detrimental to ensuring a successful application, so make sure everything is in place and 100% accurate before making a submission.
If you are in need of mortgage advice whether as a first-time buyer or just someone looking to take another step up the property ladder, call Fenton Simpson on 01904 435185 to speak to one of our friendly, expert advisors. We are more than happy to talk you through our exclusive deals and help you on your journey.