Your application was approved
The lender will write to you, your mortgage adviser (if you used one) and your solicitor with a mortgage offer. This outlines exactly what they’re prepared to lend to you, and if this is subject to any conditions. These will depend on your individual circumstances, but can include, for example, paying off a loan or credit card you might have.
It’s not the most delightful of topics, and you may have looked into this earlier in the process, but once you’ve got the offer, it’s also good to consider how you would afford your monthly payments if anything went wrong. For example if you lose your job, become seriously unwell for a longer period of time, or pass away. If the worst should happen, you wouldn’t want your loved ones to be left in the lurch with a big financial commitment hanging over them.
Check the details
Once you accept the offer, you’re one step away from being committed to the terms and interest rate of the mortgage (which happens when you complete your property purchase). So it doesn’t hurt to double-check that everything is correct and that you’re still happy with the mortgage you’ve picked.
If there are any special conditions attached to your mortgage offer, your solicitor will probably ask you to sign a memorandum of understanding, which is an agreement between you and your lender confirming that you accept the special conditions.
Your application was rejected
There are many different reasons as to why an application can be turned down. Here are some of the main areas and what to do for each. It’s also worth talking to the lender if you applied directly, and ask what feedback they can give you. Or approach a mortgage adviser for help.
Your credit history
It could be you have a poor credit history or there’s an error on your credit file. If you have a poor credit history, you could wait longer to help it improve. If you do, make sure you pay bills on time, don’t apply for more credit, and rein back your spending on credit cards.
You could also ask a mortgage adviser to help you find a lender with less demanding credit history criteria, however these lenders are likely to charge a higher rate of interest.
To find out more about getting your credit history in shape, take a look at Step 1.
You’re not registered to vote
Lenders need to be able to confirm who you are and where you live. So being on the electoral register is key. See Step 1.
Your debt and credit applications
If you have too much debt or have repeatedly made lots of applications for credit, this can count against you. In this instance, it might be best to wait a bit to help improve your credit rating.
During this waiting period, avoid taking out any new credit deals. Items will stay on your credit report for around 6 years, and credit report searches (e.g. if you have made applications for credit) will stay for around 2 years.
You had a payday loan
Since 2011, any payday loans you’ve taken out will be listed on your credit file – even if you paid them off on time. It doesn’t look good and makes lenders think you can’t cope with having a mortgage.
You don’t earn enough or your deposit is too small
Even though you’ve been advised what to borrow, sometimes the lender might look at your full application and think your salary or deposit doesn’t entitle you to the size of loan you applied for. If this is the case, you could ask for a smaller mortgage.
It’s not you, it’s the lender
Being turned down for a mortgage isn’t always to do with you or your financial situation. Sometimes a lender may have a quota for investing within a certain block of flats, for instance.
Or, sometimes lenders have a preference to lend to specific demographics. If you don’t fit these, you might be rejected. A mortgage adviser will be more familiar with each lender’s lending policy and can advise you on the lender most likely to approve your application.