If you are wondering what to do after you’ve been offered an agreement in principle (AIP), and then been declined after you apply for a mortgage, then this article is for you.
Getting turned down for a mortgage is not unusual but it is a frustrating experience, as you may feel like you have done everything right. But why was your application rejected?
In this Property Road article, we’ll explain what you can do if an application has been declined at this stage – why this might happen and who can offer advice.
What can go wrong after mortgage in principle?
If your application for a mortgage was declined after the agreement in principle was accepted, you are probably upset and/or bewildered.
However, the AIP is only a tentative offer of a mortgage, and the lender hasn’t carried out an extensive test of their criteria – that’s because they aren’t having to stump up any cash yet.
When this deeper test takes place, it might be that there are some red flags in your financial history that the lender isn’t comfortable with. We take a closer look below at some of these issues.
If so, the first step after having your application declined is to get in touch with the lender and ask for feedback on your application.
They should be able to tell you why it was declined – and what you can do to improve your chances in the future.
Once you have that feedback, it’s a good idea to speak to a qualified mortgage broker.
They’ll be able to help you understand why your application was declined and whether there are any other lenders who might be willing to offer you a mortgage. Be aware though, that non-mainstream lenders tend to offer less preferential rates.
How reliable is an agreement in principle?
Perhaps the real issue is that an AIP is not a guarantee that you will be offered a mortgage. It’s a good indication of how much you could borrow, but the final decision will depend on your financial situation at the time you apply for a mortgage.
Mortgage lenders will also usually require a re-valuation if the home is deemed to be of high risk, such as being in a flood zone.
Having a mortgage declined after having an AIP is a setback – but not necessarily the end of your home-owning dream.
After checking what the reasons for rejection are, you should consult with a mortgage broker (if you haven’t used one already) to see if other lenders are willing to offer a mortgage.
However, it’s also worth bearing in mind that having an AIP does not mean that the lender is guaranteeing you will obtain a mortgage – they are only offering an estimate of how much they are willing to lend on your income and other criteria.
What to do if your AIP has expired?
There’s also another reason why your application was declined – and that’s if your AIP has expired.
Many home hunters will not be aware that their agreement will only be valid for a set period.
Once the date passes, you’ll need to apply for an AIP again – and, hopefully, you should be accepted again.
If not, you’ll have to look at why – for example, has your income dropped? – and consider alternative lenders.
Need a new Agreement In Principle?
Use the form below to get started…
What to do if you’ve had a mortgage declined after an agreement
While it can be very disheartening to have your mortgage application declined after being offered an agreement in principle, you need to start again with the process.
We have mentioned that a common reason for rejection is that the lender has carried out a further assessment of your finances and found that you don’t meet their criteria. This could be because:
- Your income has changed
- You’ve had a change in circumstances
- They have discovered something in your credit history that they weren’t aware of before.
It’s also possible that the property you’re looking to buy doesn’t meet the lender’s criteria, or that the valuation came in lower than expected.
What to do if you’ve had a decision in principle declined
If you’ve been declined an AIP, don’t despair. There are several things you can do to try and get your application approved.
- Contact the lender directly and ask for a copy of their decision in writing
- Understand what the problem is
- Determine whether there’s anything you can do to fix it.
If your application was declined because of a change in your circumstances, you may be able to provide additional information or documentation to show that you can still afford the mortgage.
If the problem is with your previous credit history, you can try to improve your score by paying off any debts and making all your future payments on time.
If the lender is unwilling to budge, don’t give up.
There are plenty of other mortgage lenders out there, so it’s worth shopping around to see if there’s a better deal elsewhere.
What can go wrong after a mortgage agreement in principle?
Until you come to buy a house, you may have never heard of the term, ‘agreement in principle’.
Essentially, this is a good way for a lender to gauge whether you’ll be accepted for a mortgage before you start house-hunting in earnest.
It’s also worth noting that there are other important questions to ask if your mortgage application is declined. Here, we look at some FAQs to help you understand more.
Will being declined affect my credit report?
If you’re declined for a mortgage, it’s unlikely to have a direct impact on your credit report or score. However, if you make multiple applications for a mortgage over several weeks, this could have an impact.
It’s always a good idea to speak to a mortgage broker before making any applications, so you understand the likely impact on your credit score and what you can do to minimise any risk.
Where to get help if you’re having trouble getting a mortgage
If you’re having trouble getting a mortgage, there are a few organisations that can offer you help and advice.
- The Money Advice Service offers free and impartial advice on all aspects of personal finance, including mortgages.
- Citizens Advice offers free and impartial advice on a range of issues, including debt and money management.
Why have I been refused a mortgage?
There are several reasons why your mortgage application could be refused. It could be because of something in your financial history, or it could be that the lender doesn’t think you can afford the repayments.
Can I get a mortgage with bad credit?
It is possible to obtain a mortgage with bad credit, but it will be more difficult to find a lender who’s willing to offer you a loan. Mortgage brokers can help find lenders who are more likely to accept your application, even if you have bad credit.
What is an agreement in principle?
An AIP is a document from a lender that outlines what they are prepared to lend you, and the terms. It’s a good way to get an idea of how much you can afford to borrow before you start looking for a property.
Need a new Agreement In Principle?
Use the form below to get started…
How accurate is an AIP?
An AIP is not a guarantee that you will be offered a mortgage. It’s a good indication of how much you could borrow, but the final decision will depend on your financial situation at the time you do apply.
How soon can you apply for a mortgage after being declined?
If you’ve been declined for a mortgage, you’ll need to wait a few weeks, or even a few months before applying again. This is to allow time for your credit file to recover. In the meantime, you can work on improving your credit rating by paying your bills and keeping your debts low.
What are the chances of being accepted after being declined?
Your odds of being accepted for a mortgage after being declined will depend on the reason for your decline.
For example, if you were declined because of your credit history, you can work on improving your credit rating and then reapply. However, if you were declined because of something like bankruptcy, it will be more difficult to get approved.
How often do mortgages get declined?
Mortgage applications are declined for several reasons. The most common reason is poor credit history, but other reasons can include self-employment, being on a low income or having a high debt-to-income ratio.
Mortgage declines can also be due to the type of property you’re trying to buy, such as a listed building.
How can I avoid my mortgage application being declined?
There are a few things you can do to avoid your mortgage application being declined. Firstly, make sure you check your credit score and report for any errors.
You should also try to reduce your debts and improve your income-to-debt ratio before applying. Finally, make sure you choose a property that is within the lender’s guidelines.
Can a mortgage be refused after survey?
While this Property Road article looks at what to do should your mortgage application get declined after having an ‘Agreement in Principle’, it’s also worth noting that there could still be issues.
That’s when a lender declines your mortgage after a survey.
That will happen if the property is valued at less than the amount you have agreed to borrow.
Be aware too that mortgage lenders will also usually require a re-valuation if the property is deemed to be of high risk, such as being in a flood zone.
Mortgage declined after agreement in principle
If you’ve been declined for a mortgage when you’ve had an AIP, it’s important to understand why this has happened.
As we have seen, there are various reasons why your application may have been rejected, such as having a poor credit history or being self-employed.
However, there are things you can do to improve your chances of being approved for a mortgage and you should consider these ideas before you begin the house buying process.
That’s if you suspect there might be a problem with a lender – though most mortgage brokers will have the experience to tell you whether you are a good credit risk or not.
Essentially, to avoid having a mortgage declined after having a mortgage agreed in principle you should work on improving your credit attractiveness to a potential lender by reducing your debts or increasing your income.
You should also make sure you choose a property that is within the lender’s guidelines.
There’s no doubt that the process of buying a home with a mortgage is a learning curve and if you are declined, your next application will probably be stronger and more likely to meet the lender’s criteria. And don’t forget there are lots of other lenders available who are worth considering if you are turned down for a mortgage.