The journey to homeownership can hit a roadblock if a mortgage is declined due to affordability. While this rejection can hurt, there is plenty you can do to turn your circumstances around.
The solution lies with speaking to a mortgaging expert who can help iron out the main issues you may be having, if you haven’t already. First, let’s explore the most common reasons for a mortgage being declined on affordability…
Why you have been declined on affordability
When a mortgage application is declined on affordability, it means the lender has determined that your financial situation may not be right for the loan you want. You will have undergone an assessment, which looks at factors such as your income, expenses, debt-to-income ratio, credit history, and overall financial stability.
These are some of the most common reasons for affordability related mortgage declines:
Insufficient income
While increasing your income isn’t always going to be a quick fix, there are still steps you can take to improve your income profile:
High debt-to-income ratio
If you’re facing a high debt-to-income ratio, a lender may be wary of offering you more money. Here, it’s best to reduce your debt wherever possible. This will help your overall financial profile and demonstrate responsible financial management to lenders.
Unstable employment
As a rule, lenders tend to prefer stable employment histories. While you can be self-employed and get a mortgage just like anyone else, you still need to have a consistent and provable income stream. If you have large gaps in your employment history or don’t currently have a job, lenders may be wary. If possible, consider securing a steady income before reapplying for a mortgage.
Credit issues
While credit can be a whole other issue on its own, it can factor into how a lender perceives your affordability. Some of the best ways to improve your credit are to:
- Make timely payments
- Reduce outstanding debts
- Avoid new credit applications
- Review your report for inaccuracies
Insufficient deposit
Just like with credit, low deposits can be a reason for a declined application. The higher your deposit, the better your chances of securing a mortgage overall. Remember, the bigger your deposit, the lower your loan amount, which could help with affordability.
What to do after your mortgage is declined on affordability
It can be disappointing to receive a rejection on your mortgage, but with every dark cloud comes a silver lining. Going forward, you will have actionable steps to take to address the reasons your mortgage was declined on affordability.
The first, if you haven’t already, is to seek professional advice. If you were working with a mortgage adviser already, it’s unlikely they would have submitted your application if they didn’t think you would be successful. That being said, they will be able to help you work out what your main issues were.
Your next steps
If applying for a smaller mortgage isn’t an option, you’ll need to move onto a few next steps. This won’t be a quick solution, but it is worth it. Once you’ve highlighted the blocks in your affordability, you can address them. This may involve reducing your debt, improving your credit, finding ways to supplement your income, or most likely a combination of the above.
When you’re in a better place, try your best to stay there by keeping your financial profile strong. Maintain a consistent income stream, manage your debt responsibly and save as diligently as you can.
Applying for a smaller mortgage
If the reason for your denial was based on affordability, then a solution may be to apply for a smaller mortgage - one that better suits your financial situation. You can do this either by increasing your deposit or buying a house that’s worth less overall.
Ready to reapply?
Facing a mortgage decline on affordability is undoubtedly a setback, but it’s not the end of your homeownership journey. By understanding the reasons behind the decline, taking proactive steps to address financial challenges, and seeking professional advice, you can pave the way for a successful mortgage application in the future.
Remember, perseverance and a commitment to financial health are key. If you have questions or concerns about your mortgage application please get in touch with us today. Our expert mortgage advisers are on hand to help and guide you through the whole process.
Get in touch with us today!
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
Related Articles
Preparing for an affordability assessment
Assessing your affordability: getting your finances in tip-top condition
