Can a Mortgage be Declined After Offer?

For most people, a formal mortgage offer is cause for celebration. After all, it means you are now able to finance your homeowning dreams! However, an offer is not the same as closing, and a few different scenarios can still put a spanner in the works.

For The Mortgage Heroes, a declined mortgage is never the end of the story. We specialise in helping people achieve approval. To us, nothing is more important than enabling you to purchase the property you love.

Here, we clear a few things up and explain why a mortgage could still be declined even after receipt of a formal offer.

Can a Mortgage Offer Be Withdrawn?

Annoyingly, yes! A lender is within their right to withdraw their mortgage offer at any stage of the process right up until completion day. The circumstances where this can happen will be stated in your offer, so make sure you read it carefully and promptly alert your lender to any change in your situation. A lender can also take back their approval if the offer expires before you’ve found a property, or interest rates have significantly increased – troubling your affordability.

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If your mortgage application has been refused, it means you don’t comply with your bank or building society’s lending criteria. They assess your application and have a list of requirements that you need to meet in order for them to lend to you, and if you don’t satisfy their demands, they’ll turn you away.

Every lender assesses applications differently, which is why you shouldn’t be too disheartened if your mortgage is declined – you just need to find a lender whose criteria you meet.

Do Lenders Perform Credit Checks After Mortgage Offer?

Typically, a lender will carry out a cursory credit check when you apply for your agreement in principle. Your mortgage will then go into underwriting, where more in-depth financial evaluations will be carried out. At both of these stages, anything that doesn’t meet with their lending criteria may prompt them to decline your mortgage.

Once you’ve received your formal mortgage offer and are ‘clear to close’, lenders don’t usually conduct an additional in-depth credit check. However, whilst less common, it is still possible to have a mortgage declined after exchanging contracts if a significant piece of information about your financial history comes to light, your circumstances change, or suspicious activity is detected.

Find out more: Credit Score & Mortgages

At What Stage Can a Mortgage Be Declined?

A mortgage can be declined at any point in the process, however there are several key stages where offer withdrawals typically occur. The first of these is when you apply for your agreement in principle. Here, a lender will carry out a basic credit check to determine if they would be willing to lend to you in principle, enabling you to put an offer down on a property. If anything they find doesn’t align with their lending policy, you will be declined.

The next stage where you might get declined occurs once you make an offer on your property and the mortgage moves into underwriting. Here, a lender will carry out more in-depth financial checks and ‘hard search’ your credit file. This review process is much more comprehensive, meaning it’s entirely likely something that hadn’t been recognised before causes the lender to refuse you for a formal mortgage offer.

Another key stage where mortgages can be declined is after the mortgage valuation. This is essentially a property survey, but it is one done entirely for the lender’s benefit, allowing them to check that the property you’re purchasing is suitable security for the loan and meets Loan to Value (LTV) requirements. In cases where the property is found to be unsuitable, uninhabitable, or simply not worth the amount you wish to borrow, your mortgage offer may be withdrawn.

Understanding Loan-to-Value & How it Works >

Reasons Why a Mortgage Might Be Declined After Offer

In-Depth Credit Check

People who get declined after an agreement in principle are often very confused. The source of this confusion lies in what an agreement in principle actually is. This is not a formal mortgage offer, but rather an indication of intent should your application satisfy all requirements during in-depth checks. These comprehensive reviews of credit and financial history can bring to light additional information that influences the decision to lend.

Material Change in Facts

As we’ve discussed, once you’ve got a formal mortgage offer, it’s not always plain sailing. Sometimes, a significant change in your circumstances can prompt a lender to withdraw their offer. Mortgage terms differ, so what constitutes a material change will vary offer to offer. Typically, though, a material change in facts is any major event in your life that will impact your ability to repay the mortgage; for example, being made redundant, or having your working hours reduced.

Mortgage Valuation Issues

Sometimes an offer will be withdrawn following the mortgage lender’s property valuation. The aim of the valuation is to determine whether the property is worth what you’re paying for it. A down valuation can at worst prompt an immediate offer withdrawal, and at best reduce the amount they are willing to lend. This is also likely to happen if the survey identifies serious issues with the property’s structure or condition.

Learn more: What Should You Do if Your Mortgage is Declined After Valuation?

False Information or Suspected Fraud

If your lender has any inkling that you may be committing mortgage fraud, they will immediately withdraw their offer. This might happen if you lie or exaggerate your income on the application form, downplay certain aspects of your financial history, or make simple mistakes filling it out. To prevent this, your best bet is to contact a professional mortgage advisor. They will go over everything before you submit, making sure your application is error-free.

What To Do if You’ve Been Declined for a Mortgage After Offer

It’s easy to panic when your mortgage offer gets withdrawn, especially if you think your dream property might be about to slip through your fingers! However, panicking won’t solve anything, and a rushed reapplication may actually worsen your chances. This is because all in-depth credit checks are registered on your file as a hard search, and too many hard searches close together will ring any lender’s alarm bells. Instead, do the following.

  1. Contact your lender and find out why – they might not tell you, but it’s worth asking the question!
  2. Get expert guidance – whether they help you by liaising with the lender or just offer advice and support, working with a professional is always a good idea.
  3. Apply again – when it’s time to reapply, do so carefully. An expert mortgage broker will be able to identify more suitable opportunities, providing you with a better chance of success the second time around.

Mortgage Declined After Offer? Get Expert Advice

The Mortgage Heroes are on a mission to help people who have previously been declined for a mortgage buy their property at last. Talk to us today and we’ll help you achieve success the second time around!

Read next: How to Get a Mortgage Fast

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