Mortgage declined before completion – what to do next

Bad Credit Discovered During Final Check

Some mortgage lenders may perform a final credit check between the exchange of contracts and your completion date. If your circumstances drastically change you are expected to inform your mortgage lender about it, and this may also prompt them to carry out some last-minute checks. A significant decrease in your credit score is likely to ring alarm bells for lenders, causing them to withdraw their offer even at this late stage.

Read more: Credit Score & Mortgages – What Credit Score Do You Need for a Mortgage?

Your Affordability Has Changed

Mortgage affordability is essentially a measurement used by lenders to assess your ability to repay your mortgage. As a general rule, to pass this check your ongoing property costs should not exceed one third of your gross income. Any changes in your financial situation can have a huge impact on whether or not you meet a lender’s affordability criteria. This is because job changes, new loans and increases in regular expenditure can all be significant tolls on your monthly expenses, and mean you can no longer manage the additional repayments.

Mortgage Declined on Affordability? Here’s What to Do.

The Lender Suspects Fraud

A mortgage offer might also be withdrawn at a late stage if your lender suspects fraud. There are many reasons why this unfortunate situation can come about, the main one being that you have made errors on your application. If this is the case, the issue can usually be quickly resolved by finding an expert mortgage broker to liaise with the lender.

The Offer Has Expired

Purchasing a property can be a complicated, lengthy process. With mortgage offers typically valid for around 3-6 months, it’s possible your agreement could lapse before you reach completion – particularly if surveys and other stages hold things up. However, in this scenario, you can absolutely reapply for the same mortgage, and have a good chance of success if none of your other circumstances have changed.

Read more: How to Get a Mortgage Fast

Lending Requirements Have Changed

A recent change in the Bank of England’s base interest rate can affect the interest rates on products offered by mortgage lenders. As a result, the lender may have changed their lending requirements to the point where you no longer fulfil them. If this happens, you will have to seek out a different lender who is a better fit for your circumstances.

Don’t Panic

Being declined at this late stage can be hugely upsetting – particularly when you consider the potential legal and financial implications of failing to complete. As a result, you may be panicking and thinking about reapplying as soon as possible to get the purchase back on track. Be wary, though, as lots of finance applications close together can have an impact on your credit score. Instead, sit back, take a deep breath and look at the information in front of you objectively.

Find Out Why

Do you know why you were declined? Now is the time to ask. Your lender is not obligated to give you an answer, but they might, and this will help you determine the best next steps to take. If they don’t explain, there are still ways to figure out what caused the issue. Look over your credit score and application documents and see if you can spot irregularities or changes that might have spooked the lender – get the opinion of a mortgage specialist if you’re not sure. Armed with this information, you’ll be able to decide whether it’s worth reapplying quickly or whether there’s a larger problem to resolve.

Manage Your Money Well

If it has become clear that you won’t be able to rescue your declined mortgage, you’ll want to start looking elsewhere. But if something in your application or credit history caused the previous lender to withdraw, there’s no guarantee a future one will see things differently. Prospective lenders will want to see that you can manage your money well and keep up with the monthly repayments. So, before you rush to make another application, work to put yourself in a better position financially by paying back debts on time or taking out a debt consolidation loan to do so, and budgeting carefully.

Get Expert Advice

To rescue your house purchase from the ashes, you’ll need an expert eye. Whether it’s liaising with the lender to get things back on track, or sourcing a new option for your finance, they’ll be able to recommend a solution. There are some lenders who can be flexible with bad credit, offer higher income multiples or even give second chances to those who have been declined after exchange. A specialist mortgage broker will be able to guide you through reapplication process, and ensure you have the best chance of success.