It can be frustrating to receive a declined mortgage application. While you were so sure that you would be approved, there is something in your documents that ultimately became the main reason for denial. If you want to know why you were not approved, below are some of the possible reasons:
1. Debt
Debt is one of the most common reasons for mortgage application rejection. With the many down payment assistance programs in today’s market, too many people are applying for mortgages with debt.
Debt includes equity loans, credit cards and cars, and they can add up quickly. If you have a lot of debt, you should consider reducing or eliminating it to make your mortgage application more favourable.
2. Low Income
Your mortgage application will likely be denied if your income is too low. A low income means that you may not have enough money to cover your mortgage without spreading yourself thin. This also means that you are unlikely to have savings, which is risky if you lose your primary source of income.
A higher income would get you approved. If you have a partner, make sure to indicate their income too. Additionally, include any regular remittances or additional side jobs you may get payment from.
3. Poor Credit Score
If your credit is not in good standing, your mortgage application will likely be denied. There are many different reasons for a low credit rating, but the most common is a history of late payments.
A poor credit score indicates possible financial problems in the past. It could also be telling of how you are with your payments. Lenders would not want to risk lending to someone who would end up making late payments.
4. Lacking Documents
If you have documents missing from your mortgage application, lenders will reject them. Every lender has different requirements for mortgage applications, so make sure to get all documents possible, from identity to the details of the house you are buying and your financial statements with proof of income.
You have to get this organised before you apply for a mortgage loan. Lenders may not give you the time of day if they find out you are missing a document. To save yourself a trip of going back and forth, contact the lenders beforehand to find out the requirements or check online.
5. Prior Bankruptcy
If you have filed for bankruptcy, you may be denied a mortgage. In some cases, your bankruptcy may be discharged after seven years.
However, some lenders will not consider you for at least 10 years after your bankruptcy was discharged. This is because of the risk of another bankruptcy in the future. If you were part of a business that declared bankruptcy, it might be necessary to wait even longer.
6. No Down Payment
While there are rare cases where a down payment is not required, it is almost impossible to get approved. Some lenders will allow you to put down as little as 3%, but most require at least 10%.
This helps the lender feel more confident about providing you with a mortgage loan. If you don’t have enough money to make a down payment, it is best to save up or look into a different mortgage option.
Conclusion
Receiving a declined mortgage application is never easy and can be frustrating. However, it is important not to become discouraged. You may just need to take a look at other options. It is always best to contact the lender if you believe a mistake was made.
If you are looking for mortgage advisers in Chester, you can contact A Move Brokers. We offer a free consultation to provide you with the mortgage you need. Contact us today to get started.
This article is for information only and should not be seen as advice or a recommendation to act. As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments.