The decision about your mortgage application
Applied for a mortgage and received an offer from your lender? Congratulations! There are just a few more things to consider and put in place before completion. Or, was it rejected? In which case, find out what you can do next.
Your application was approved
The lender will write to you, your mortgage adviser (if you used one), and your solicitor or conveyancer, 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 could include paying off a loan or credit card you might have.
It’s not the most happy of topics, and you might 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, or interest rates are much higher at the end of a fixed period. Or you become seriously unwell for a longer period of time, or pass away. If the worst should happen, you may want to consider how you, or your loved ones would deal with the outstanding mortgage.
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. That’s 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.
You could also ask a mortgage adviser to help you find a lender with less demanding credit history criteria, bear in mind these lenders might charge a higher rate of interest.
To find out more about getting your credit history in shape, take a look at our section on sorting your finances.
Lenders need to be able to confirm who you are and where you live, and so being on the electoral register is key.
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, it’s a good idea to avoid taking out any new credit deals. Items will stay on your credit report for around 6 years. Similarly, credit report searches, for example, if you’ve made applications for credit, will stay on your report for around 2 years.
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.
Even though you’ve been advised what to borrow, sometimes the lender might look at your full application and think your income or deposit doesn’t entitle you to the size of loan you applied for. If this is the case, you could ask the lender what they would be willing to offer.
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.