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

You’ve passed the initial checks, found the property of your dreams, and maybe even have a Mortgage Agreement in Principle. You’re ready to exchange contracts and start the countdown to move in day. But then, the worst thing happens! Your mortgage is declined by the underwriter, scuppering all these exciting plans.

A leading whole-of-market mortgage broker, The Mortgage Heroes are dedicated to supporting people in many different situations find the right mortgage product and lender for them. We’re based in Bristol but work across the country and specialise in finding the most suitable rates for all types of buyers. From foster carers to first time buyers to those with a bad credit score, we help our clients overcome the obstacles and achieve the home of their dreams.

In this article, we guide you through what to do if your mortgage has been rejected at the underwriting stage.

What Does a Mortgage Underwriter Do?

Mortgage underwriters may get in the way of your house-buying dreams, but they’re not supervillains. They work for lenders and are responsible for going through your application with a fine-toothed-comb, determining what level of risk you pose. They will also make sure your application is in accordance with the lender’s policy and guidelines which can lead to creditworthy applicants being denied, so it’s important to make sure you’re applying for the right mortgage for you.

They will conduct an in-depth analysis of your finances, making sure you have a stable income and can cover repayments, and that all the information and documentation you have supplied checks out. They will also appraise the property you want to buy, making sure it is valued correctly and will not become unaffordable in the future. And, if they aren’t satisfied by their investigations, they decline mortgages.

See more: Mortgage Terminology Explained – A Glossary of Mortgage Terms >

Why Do Underwriters Decline Mortgage Applications?

Failing Income Checks

An underwriter will want to make sure that your income is stable, so not advising them of any changes to your situation such as furlough or being made redundant could determine their decision. They may decide your income streams are not reliable or regular enough because you are self-employed, an agency worker, or a contractor – in these scenarios, it’s important to find the right lender, as not all will be prepared to consider you.

Underwriters will also analyse your debt-to-income ratio and your financial flexibility, making sure you can meet the demands of your mortgage repayments now and into the future. They will check everything you have told them about your income – according to CIFAS, 13% of people in the UK thought it was ‘reasonable’ to exaggerate income on a mortgage application. Underwriters, by contrast, do NOT find this reasonable – so don’t do it!

Property Appraisal

During the underwriting process, a property appraiser will conduct an independent valuation of the property you are purchasing, making sure the vendor’s price is accurate. They will also consider the level of maintenance and repair the property might need now and in the future, determining whether you will be able to afford these rising costs alongside the mortgage repayments. A title company will also verify that the property has not been used as collateral and that no one else has the legal right to the property through a lien placed against it.

Irregularities and Errors in Documents or Application

Sometimes, a simple error can cause an underwriter to deny your mortgage outright. Inconsistencies can make them doubt the trustworthiness of the application, and not supplying adequate documentation can also be a red flag. You have to remember that you’re hoping to borrow a large sum of money, so anything that looks even a tiny bit fishy can make the difference between approval and rejection.

Working with a mortgage broker can be a great way of getting your application in the best shape. A professional advisor can talk you through the paperwork, ensuring every detail is correct and thought through, dramatically increasing your chances of success.

Need a Mortgage Hero? We’re here to help.

Poor Credit Score

If your credit score is deemed too low, your application may be rejected. Generally speaking, having less debt helps lenders view your application as lower risk, and holding off taking out new loans leading up to and during the application process also tends to be a good idea. Some lenders use automated underwriting systems, so it’s important to remember that a credit score is a number, and numbers don’t leave room for exceptions and excuses. Your number is either acceptable or not.

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

Not Meeting Policy Guidelines of Lender

Every lender will have a policy specifying what kind of applicants are prepared to give money to. If you don’t meet these requirements, you will be rejected even if in all other ways you are creditworthy. This is out of your control, and can be avoided by researching the market well beforehand.

At The Mortgage Heroes, we make finding the right mortgage easy. Our industry knowledge and financial expertise means you don’t need to waste time applying for a mortgage that isn’t right for you.

What to Do if Your Mortgage Application Has Been Declined by Underwriter

Don’t Panic

A rejected application doesn’t mean you’ll never qualify for a mortgage, so try not to worry too much. Of course, it may a spanner in the works when it comes to the buying process, but all is not lost yet.

Identify Issue

Appealing the decision is unlikely to make much difference, as the underwriter will have considered all aspects of your application in great detail. However, finding out what the issue is may allow you to resolve it – for this application or future ones.

Working with a professional mortgage broker can help in this instance, as they can liaise with the underwriter and quickly sort out any problems, getting your property purchase back on track.

Seek Professional Advice

Maybe your application was denied because you didn’t fit with the lender’s guidelines. Maybe you need to work on your application, save up for a bigger deposit, and try to improve your credit score. Whatever the case may be, a mortgage broker can help you figure out the best steps to take to increase your chances of success next time, as well as identifying a more suitable lender with a mortgage product that suits your circumstances.

See more: What are the Different Types of Mortgages?

Wait Before Reapplying

A denied mortgage won’t get logged on your credit score in itself, but it will be recorded as a hard search. Make sure you don’t reapply until you’ve sought professional advice as too many credit searches in the short term could affect your future chances of success. In the meantime, make your application the best it can be, and hopefully the next underwriter will say yes!

Declined Mortgage? Let Us Come to Your Rescue!

At The Mortgage Heroes, we’ve helped plenty of people who have previously been rejected secure the right mortgage for them. We don’t let challenges or complex situations get in the way of our client’s home-owning dreams. Instead, we take the stress out of the whole process and find the lender and product best suited to their lifestyle. We’re called heroes for a reason!

Give us a call today and we can talk you through the next steps, whatever your circumstances.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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

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