Mortgage Declined Before Completion

In the journey of purchasing a property, few experiences can be as stressful or disheartening as having your mortgage declined before completion. This scenario often leaves prospective homeowners in a predicament, as they are faced with the daunting task of finding a quick solution or risk losing the property.

This insight aims to shed light on the reasons behind such occurrences and provide practical solutions to resurrect your mortgage application today.

Key Takeaways

• Mortgages can be declined before completion due to poor credit, altered financial circumstances, suspicion of financial misconduct, and errors in the application.
• Stay calm, understand the reasons for the declination, manage finances effectively, and seek expert guidance from a mortgage broker.
• Talk with a Mortgage Adviser, they provide tailored advice, negotiate with lenders, and help with the reapplication process. Specialist lenders offer alternative options for clients with declined mortgages.
• If traditional lenders decline the mortgage, consider other lenders and explore options with specialist lenders.

Why Has Your Mortgage Declined Before Completion?

The process of securing a mortgage is intricate and involves numerous credit scoring checks and approvals from the lender's end. Although rare, there are instances when a mortgage offer gets withdrawn even after the exchange of contracts. This usually happens when the lender identifies a significant change or error that could potentially affect the borrower's ability to repay the loan.

Some of the common reasons for a mortgage being declined before completion include:

Unexpected Discovery of Poor Credit

Most lenders conduct a thorough credit check during the initial stages of a mortgage application. However, in some cases, a late-stage credit check might reveal bad credit that was not previously detected. If the lender believes the level of bad credit poses a high risk, they might decide to withdraw the mortgage offer.

Altered Financial Circumstances

The financial affordability of a borrower is a crucial factor in a lender's decision to offer a mortgage. If the lender suspects any changes in the borrower's income or expenses that could affect their ability to repay the loan, they might choose to reassess the case and potentially withdraw the mortgage offer.

Suspicion of Financial Misconduct

Lenders have the right to withdraw a mortgage offer if they suspect any form of financial misconduct, such as fraud or money laundering. Such activities pose significant risks to the lender, prompting them to reconsider their decision.

Errors in the Application

Even minor errors or discrepancies in the mortgage application can derail the approval process. It's essential to ensure all the information provided is accurate and up-to-date to avoid potential issues. Other than errors, you could just find that your mortgage offer has expired before completion. There is a quick solution to this which just involves a refresh of your credit check and documents.

What To Do If Your Mortgage Declined Before Completion

If you find your mortgage has been declined before completion, it's crucial not to panic. Here are some steps to help you navigate this challenging situation.

Stay Calm and Assess the Situation

The initial shock of a declined mortgage can be overwhelming, but it's essential to remain calm and evaluate your situation objectively. Making multiple mortgage applications in haste can negatively impact your credit score. Therefore, take some time to absorb the information and plan your next steps.

Understand the Reasons for Declination

The first step towards resolving the issue is understanding why your mortgage was declined. Although lenders are not obligated to provide an explanation, they often do. This information can guide your subsequent actions. If the lender does not provide an explanation, you can consult a mortgage adviser or review your application and credit history to identify potential issues.

Manage Your Finances Effectively

Before reapplying for a mortgage, it's crucial to reassess your financial health. Make sure you are managing your debts effectively and maintaining a healthy credit score. This can include making timely payments, reducing outstanding debts, or considering a debt consolidation loan.

Apply For a Decision With The Underwriters

Most of the time, credit decisions are automated. It's possible that you speak to your existing lender and request your application to be sent to the mortgage underwriters. They will have the ability to override any automated credit decisions. For example, if you can evidence a temporary lapse in credit score due to an error, alongside providing evidence of this, your mortgage underwriter may overturn the declined mortgage decision.

Seek Expert Guidance

Getting professional help can be invaluable in this scenario. A mortgage adviser can provide expert advice on how to navigate this situation, whether it's liaising with the lender or finding suitable alternatives.

How Mortgage Advisers Can Assist

Mortgage advisers can be your guiding light in these challenging times. They can help you understand the reasons behind the declination and provide bespoke advice tailored to your circumstances. They can also negotiate with lenders who:

• Offer second chances to clients with a declined mortgage
• Show flexibility towards bad credit
• Offer higher income multiples
• Approve clients with high debt-to-income ratios

Furthermore, a mortgage broker can assist you through the reapplication process, ensuring your application is error-free and stands the best chance of approval.

The Role of Specialist Lenders

In certain cases, traditional lenders might not be willing to reconsider their decision. This is where specialist lenders come into play. These lenders cater to clients with unique circumstances, including those who've had their mortgage declined before completion. They offer more flexible lending criteria, allowing them to accommodate a wider range of clients.

Overcoming a Declined Mortgage

To better understand the process of overcoming a mortgage decline, let's consider the real-life example of Neil. At the age of 55, Neil was due to move into his new home when his mortgage was declined due to an overlooked credit card debt from nine years ago. The lender discovered this debt during a last-minute check and decided to withdraw the mortgage offer.

Neil had already paid a significant deposit towards the property and was on the brink of losing his dream home. However, instead of giving up, Neil sought help from an adviser and managed to secure a new mortgage offer from a specialist lender. Though he had to pay higher fees due to his old credit card debt, he was able to move into his new home and plans to remortgage to a cheaper fixed-rate deal once the credit marker is removed from his file.

This case illustrates the importance of seeking expert advice and exploring alternative solutions when faced with a declined mortgage.

Expert Advice for Those Facing a Mortgage Decline

If your mortgage has been declined before completion, industry experts suggest the following:

• Contact your lender to understand the reasons behind the declination and explore possible solutions.
• If your original lender cannot assist, consider seeking help from other lenders.
• Always be aware that mortgage lenders have the right to withdraw an offer before completion if they find any discrepancies in your credit report.

Improving Your Credit Score

Improving your credit score can increase your chances of securing a mortgage. Here are some tips to help boost your credit profile:

Check Your Credit Score

Understanding your current credit standing is the first step towards improvement.

One of the easiest ways to view your personal credit score is to use a multi-credit report agency. One of the highest-rated services available for doing so is Check My File. CheckMyFile gives you a free 30-day trial to see your Experian, TransUnion and Equifax reports in one place. After that, it's £14.99 a month, but you can cancel at anytime. 

VISIT CHECKMYFILE

Ensure Your Report is Accurate

Errors in your credit report can negatively impact your score. Therefore, double-check all the information in your report and rectify any inaccuracies as soon as possible.

Make Timely Payments

Your payment history significantly influences your credit score. Set up automatic payments or use banking apps to ensure you never miss a payment deadline.

Register on the Electoral Roll

Being on the electoral roll makes it easier for companies to identify you, which can speed up the credit application process.

What Else Can Impact Your Completion?

There are things that can go wrong between exchange and completion, but 90% of the time they work themselves out. Examples can include sudden deaths, flood damage, delay of funds, changes in credit score, or expired mortgage offers. Rest assured, these are not common issues. In fact, you would have to be really unlucky to suffer any of these. That's mainly because, by the point of exchange, the transaction should be legally tight and binding.

Next Steps

Having your mortgage declined before completion can be a stressful experience. However, understanding the reasons behind this situation and seeking professional advice can help you navigate these challenges effectively. Remember, a declined mortgage is not the end of your home-buying journey. With the right guidance and determination, you can overcome this hurdle and secure your dream home.