Mortgage Declined on Affordability? Here’s What to Do

It’s bitterly disappointing to learn that your mortgage application has been declined. You may have found the house of your dreams and are looking forward to moving in day. But, without finance, those home-owning dreams might seem further away than ever.

Don’t worry, it’s not the end of the world if you get refused by a lender on affordability. Others might have different criteria, and with expert advice you can take steps to ensure future applications have a greater chance of success.

The Mortgage Heroes are specialists in our field, helping clients across the UK secure the right mortgage and cover for their situation. Whether you’re a foster carer, a first time buyer, a contractor, or need a mortgage fast, we’ll take the time to understand your unique situation, and find a mortgage that fits.

In this blog, we explain why a mortgage might be declined on affordability grounds and what you can do about it.

What is Mortgage Affordability?

Affordability is essentially your perceived ability to meet the monthly mortgage repayments. Affordability is not the same as being able to afford a mortgage though, as different lenders have different criteria. That’s why you could be denied a mortgage on the basis of affordability because you are an agency worker, for example, but bring in more than enough money to cover the costs. For that reason, it’s important to find a lender that specialises in your situation – something The Mortgage Heroes can help you with!

The Mortgage Market Review by the Financial Conduct Authority in 2014 has meant stricter guidelines when it comes to responsible lending. Lenders now consider monthly expenses, not just income when deciding on affordability. A bank statement with large outgoings and red flag transactions like gambling can lead to instant refusal.

Read more: Getting a Mortgage as a Contractor – Everything You Need to Know

Why Do Mortgages Get Declined on Affordability?

There are various reasons why a mortgage application might get declined on affordability grounds. Here are some of the most common.

Issues with Income

Depending on their criteria, a lender might decline your mortgage as a result of issues with your income. Maybe your income doesn’t meet their ‘mortgage multiple’ or ‘income multiple’ criteria, a key part of any affordability decision.

For most lenders, they will work out the maximum amount you can borrow by multiplying your income by a specific number – usually between 3 and 6. If you’re trying to borrow an amount much larger than the resulting figure, the lender will probably decline your application.

Other reasons your income may cause issues is if you are an agency worker, a contractor, or are self-employed. This might make your income appear unstable month on month, which is why it is important to choose a lender who specialises in your situation.

See more: How to Get a Mortgage When Self-Employed >

High Monthly Expenditure

Lenders will analyse your bank statements as part of their affordability checks, looking to see how much disposable income you have per month. If you have lots of bills, high living costs, and seemingly reckless spending habits, you’re likely to get declined.

Attention will be paid to the type of payments being made, so outgoing money paid into an ISA is not going to cause an issue, but gambling might. Basically, they want to see that you know how to manage your money and will easily be able to add mortgage repayments to your list of outgoings without it causing an issue.

What Should You Do if Your Mortgage Has Been Declined by an Underwriter?

Other Debts

Lenders will look at your debt to income ratio during their checks to see if you can handle another regular financial commitment. That’s why it’s a good idea to pay credit card bills promptly and try to avoid taking out new loans leading up to and during the application process.

Poor Credit Score

We all know a poor credit score can be a major red flag for lenders. Your credit score is a number that represents your ‘creditworthiness’. The higher your score, the more attractive your mortgage application will be. Many different factors contribute to the final number, including number of accounts, total debt, and your repayment history.

If at this point the lender discovers something undisclosed in your credit history such as past bankruptcy, a County Court Judgement, or a previous home repossession, it is extremely likely they will refuse you.

But all is not lost. Even if you have a bad credit score, there are lenders out there who specialise in poor credit loans and will consider your application. Talk to us, and we’ll help you find the right mortgage.

Read next: What Credit Score Do You Need for a Mortgage?

Finances Failed the ‘Stress Test’

A common method lenders use to establish your affordability is to ‘stress test’ your income. This will include forecasting what might happen to your finances if you have a baby, lose your job, or interest rates rise. If you don’t have a lot of wriggle room and your monthly income isn’t enough to handle significant changes like this, the lender might decline you.

What to Do if Your Mortgage Has Been Declined on Affordability

If you’ve been declined on affordability grounds, the most important thing to do is keep calm. Try to figure out why you’ve been refused. If the lender won’t tell you, review your application and try to work it out yourself.

If you’ve been declined because you are trying to borrow more than their mortgage multiple criteria allows, you could lower your aspirations or consider a longer repayment term. Other options include building up a bigger mortgage deposit, securing a guarantor, or putting down collateral if your lender accepts this.

In cases where you can’t make it work with the lender, it might be time to step back, rethink, and reapply. Don’t rush to send off another application though – too many hard searches on your credit history in a short space of time can be a red flag. Instead, work on improving your financial picture by paying off debts, reining in your spending, and budgeting carefully to prove how financially responsible you are.

It’s also a good idea to enlist the help and expertise of a mortgage specialist like The Mortgage Heroes. Your dedicated hero will be able to help you find and secure a mortgage that’s right for you whatever your situation. We’ll guide you through the whole application process, dramatically increasing your chance of success the second time around.

Read next: Mortgage Declined – What to Do Next?

Trusted Mortgage Advice for Any Situation

The Mortgage Heroes are whole of market mortgage brokers, helping people in all sorts of circumstances find a mortgage that’s right for them. We’re committed to finding the most suitable mortgage for our clients and helping even non-standard applicants get the finance they need to buy their property. We don’t usually wear capes, but we’re pretty good at saving the day.

Whatever your income type, lifestyle, or credit history, we can scour the market to find a specialist lender perfectly suited to you.

Get in touch with a hero today – we’re ready to come to your rescue!

Read more: What Are the Different Types of Mortgages?

Read more: All You Need to Know About CIS Mortgages

We can help you find a mortgage. Contact a mortgage hero today.

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