Mortgage applications – what can go wrong?

Before starting the house-hunting process, many first-time buyers visit a mortgage lender or broker to see whether they are likely to be accepted for a mortgage.  Having an ‘agreement in principle’ (AIP) can really help to make the process go quicker once you’ve put an offer on a house, but unfortunately an AIP isn’t quite the same as having a binding agreement.

A mortgage lender will base the AIP on a number of assumptions – if any of these are found to be incorrect or circumstances change, then your mortgage application could still be denied.

If your mortgage application is declined, then it’s important to try and figure out what went wrong, so you are able to put this right and carry on with the process.  Below are a few examples of things that could go wrong with your mortgage application so you know what to avoid!

Credit rating

Your credit score is important to a lender – having a good score will show to a mortgage lender that you are a responsible borrower and you haven’t had any financial hiccups in the past.  Give yourself a head start by checking your own credit score for free before you apply using sites such as Experian, Equifax or Noddle. Review your score.

Non-disclosure of information

When you apply for a mortgage it’s important to be truthful with your lender.  So no embellishing the truth when it comes to how much you earn, or conveniently forgetting how much outstanding debt is on your credit cards.  A mortgage lender will need to see documentation to prove your financial status so if you’ve stretched the truth a little bit in order to get an AIP, it may all start unravelling once the application starts to move forward.

Low valuation

Sometimes having your mortgage application declined is nothing at all to do with your own circumstances; it may come down to the actual property which you are planning to purchase.

Before agreeing to your mortgage, the lender will require a valuation to be done on the property – the results of this could impact on their decision to lend to you or not.  If the valuation comes back much lower than what you have offered on the property, the lender may choose not to go ahead with the mortgage application.

Although you may have your heart set on a property, make sure you do your research before you put in an offer.  Check out websites such as Rightmove or Zoopla to see what other properties in the area have sold for and base your offer on that.  Although you may be prepared to pay over the asking price, if this isn’t reflected in the valuation, you may find that you lose out on the property anyway because you can’t get a mortgage.

Problems with the survey

Another reason that the lender may decline your mortgage application is if any problems come back from the survey.  Whilst a lender only requires a valuation of the property, most buyers choose to have a more detailed survey done on the property, which highlights any issues or potential problems with the house.

If there are any major issues with the property, your lender is unlikely to overlook these even if you can see past them.

Change of circumstances

Whilst some events may be beyond your control, it would be wise not to purposely make any major life changing decisions once you have your AIP from the mortgage lender!  Your lender will expect you to have a regular income in order to be able to afford the mortgage payments, so spontaneously deciding to quit your job or becoming self-employed may seem like a good decision, but in terms of your mortgage application it isn’t!  If you suddenly discover you have a child on the way, this could impact things or any excessive or unusual spending on your credit cards.  If you have an AIP, it’s always wise to keep to the status quo as much as you can!


The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media.


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