7 Main Reasons You Might Be Denied a Mortgage

We analyze the most common reasons for mortgage application refusals and explain how to address the situation.

Mortgages are among the most frequently approved loans, but refusals do happen. In this article, we examine the main reasons banks reject applications and explain how to find out why you were denied and increase your chances of approval.

1. Poor or Nonexistent Credit History

One of the first things banks check for a potential borrower is their credit history, which contains information on all past and current loans.

By reviewing your credit history, the bank assesses how responsibly you fulfill your obligations. Short delays of up to a month generally do not damage your history, but longer or frequent delays, evasion of payments, and legal disputes over past loans significantly reduce your chances.

If you have had delays of more than 60 days in the past six months, you will most likely be denied a mortgage.

2. Insufficient Income

Generally, banks follow the rule that the monthly mortgage payment should not exceed 30–40% of the borrower’s net income — that is, income after taxes, child expenses, payments on other loans, etc.

If your income is insufficient under this calculation, you can try increasing the loan term, reducing the requested amount, or finding a co-borrower or guarantor.

When verifying income, banks also consider the employer. If the employer has tax issues or ongoing legal disputes, the bank may question the stability of the client’s income.

3. High Credit Load and Existing Debts

Banks calculate the debt-to-income ratio. According to this measure, payments on existing loans plus the future mortgage should not exceed 50% of the borrower’s income.

Banks also consider debts for which enforcement proceedings have been suspended but not completed — for example, if the authorities were unable to recover the debt and returned the enforcement order to the creditor.

4. Providing False Information or Errors in Documents

Even unintentional misrepresentation or mistakes in your application can lead to mortgage refusal. The bank may ask why you overstated your income or listed an incorrect registration address, or it may simply deny the application. Therefore, double-check your completed forms and other documents before submitting.

5. Issues with the Property Being Financed

The purchased property typically remains collateral with the bank until the mortgage is fully repaid. Therefore, the lender carefully evaluates its liquidity: how quickly and at what price the collateral can be sold if you fail to service the mortgage.

If the refusal is due to the property, consider choosing a different property and check the bank’s requirements. Many lenders do not accept apartments in buildings with wooden floors, older than 35–40 years, or properties with unauthorized renovations.

6. Small Down Payment

Today, a down payment of 30–40% is considered only adequate. If your credit history has flaws, it is better to increase it as much as possible, but sometimes even 50% of the property’s cost may not be enough.

Do not take a consumer loan to increase your down payment. Credit bureaus update information quickly, and before signing the contract, the bank will likely check your credit history again. The increased debt load could result in a refusal just before document signing.

7. Borrower’s Appearance and Manner of Communication

More mortgage applications are being processed and approved remotely, but in-person submissions are still relevant. When visiting the bank, pay attention to your appearance and behavior: credit managers often form a subjective impression, so dress neatly and answer questions confidently and calmly.