What To Do If NatWest Rejects Your Mortgage Application

Facing a mortgage rejection from a major bank like NatWest can be disheartening, but it’s not the end of the road for prospective homebuyers in the UK. Understanding why your mortgage application was rejected and what steps you can take to improve your situation can help you get back on track towards home ownership. This guide will cover why mortgage rejections happen, what to do immediately after a rejection, and how to improve your chances in the future.

1. Understand why NatWest rejected your mortgage application

The first and most important step is understanding the reason behind NatWest‘s decision. Mortgage rejections are typically based on one or more factors, such as:

• Affordability concerns: NatWest may have deemed your income insufficient to cover the mortgage repayment based on the amount you requested.
• Credit history issues: A poor or limited credit history can impact your eligibility for a mortgage.
• Deposit size: NatWest, like other lenders, requires a minimum deposit. If your deposit was deemed too small or risky, this could be a reason for rejection.
• Employment stability: If you have an irregular income, short employment history, or are self-employed without consistent financial records, your application might be considered high risk.
• Debt-to-income ratio: If you have significant debts, your overall affordability score could be negatively impacted.

NatWest should give you a reason for rejecting your application, so contact them to request an explanation. This will help you address any specific issues before reapplying.

Learn more: Mortgages, Self-employed mortgages, First-time buyer mortgages, Buy-to-let mortgages, Mortgage brokers for first-time buyer and Mortgage brokers

2. Consult a mortgage broker

A mortgage broker can provide tailored advice and help you find a lender that best fits your circumstances. Brokers have access to a wide range of lenders, including some that you might not have considered or been aware of. They can also negotiate on your behalf and help you understand how to improve your eligibility.

Additionally, brokers are particularly useful if you’re a first-time buyer, self-employed, or have a unique financial situation. Some brokers charge fees, while others earn commissions from lenders, so it’s essential to find a reputable broker who is transparent about their fees and services.

3. Check your credit report and score

One common reason for mortgage rejection is a low or problematic credit score. You can check your credit report with agencies such as Experian, Equifax, and TransUnion. Reviewing your report helps you identify any errors or unexpected issues, such as old unpaid bills, missed payments, or fraudulent activity.

If you find errors, contact the credit agency immediately to dispute them. In cases where your credit score is low but accurate, consider actions to gradually improve your score, like paying down existing debt, ensuring bills are paid on time, and limiting credit applications.

4. Reassess your financial situation

Take a closer look at your finances to assess what improvements you can make:

• Save for a larger deposit: A higher deposit can reduce the lender’s risk and may improve your approval chances. If you can save for a 15-20% deposit rather than the minimum 5-10%, you’ll strengthen your application.
• Reduce outstanding debts: Try to pay off some debts to lower your debt-to-income ratio. This can improve your credit score and make you a more attractive applicant.
• Review your income stability: If you recently changed jobs or have been self-employed for a short period, consider waiting until you have more consistent financial records. Lenders usually look for a stable income history of at least two years.

5. Consider an alternative lender

NatWest is one of many mortgage lenders in the UK. If you were unsuccessful with NatWest, consider other lenders that might have different criteria or offer specific products suited to applicants in situations like yours. High street banks like Barclays, HSBC, and Lloyds, as well as smaller building societies and online-only lenders, may be worth exploring.

Each lender assesses risk differently, so you may find that another lender is more suited to your financial profile. Keep in mind, however, that multiple applications in a short time can negatively impact your credit score. Instead of directly applying, you might want to use a mortgage broker to guide you to lenders that are most likely to accept your application.

6. Improve your financial health

If your mortgage was rejected because of affordability or debt issues, work on improving your financial health before reapplying. Simple steps include:

• Cutting unnecessary expenses: Reducing your monthly outgoings can help improve your affordability profile.
• Building a strong savings habit: Consistent saving demonstrates financial stability, which lenders value. This can also help you save up for a higher deposit.
• Boosting your income: If possible, consider options to increase your income, such as part-time work, freelancing, or side businesses. However, make sure additional income sources are stable and can be documented.

7. Wait and reapply

If NatWest cited recent credit activity or employment changes as reasons for rejection, it might be beneficial to wait and reapply once your circumstances have stabilised. For example, if you recently switched jobs, lenders may be more comfortable if you reapply after six to twelve months of stable employment in your new role.

Additionally, if you’ve recently taken on new debt, waiting until your credit score stabilises could work in your favour. Be patient and use the time to improve your credit score, build savings, and reduce debts.

8. Appeal the decision (If Applicable)

If you believe there was an error or misunderstanding in NatWest’s assessment, you can appeal the decision. This is usually done by contacting the mortgage advisor or department directly, providing additional documentation, or clarifying any information that may have caused concern. Although appeals are rare and not always successful, it’s worth trying if you have grounds to believe the decision was based on an error.

9. Explore Government schemes for help

In the UK, there are various government schemes designed to assist first-time buyers and those with low deposits. Some options include:

Shared Ownership: This allows buyers to purchase a share of a property and pay rent on the remaining portion.

First Homes Scheme: Aimed at first-time buyers, this scheme offers discounts on new homes in certain areas.

Check if you qualify for any of these schemes, as they can make mortgage approval easier and more affordable.

In closing: Take a strategic approach after a mortgage rejection

Being rejected for a mortgage by NatWest may feel like a setback, but it’s important to see it as a learning experience. By understanding the reason for the rejection and taking proactive steps to improve your finances, you’ll increase your chances of success when applying again. Remember that there are many lenders in the UK, and with persistence, a bit of patience, and possibly the help of a mortgage broker, you’re likely to find a mortgage that fits your needs.

FAQs

Continue Reading