8 unexpected things that can hold up a mortgage application

David Wilson Homes, in collaboration with Terry Higgins, Group Managing Director at The New Homes Group, has revealed eight common mistakes that mortgage applicants make—including those that could delay their path to securing a new home.

Gifted funds

Gifted deposits reached a record high in 2024, with reports indicating that financial gifts will contribute to 42% of purchases by first-time buyers under 55. However, more than two-thirds (69%) of Brits remain unaware that gifted funds could affect the outcome of their mortgage application.

"While gifted deposits can be a great way to support first-time buyers, they can also raise potential red flags during the mortgage application process if not properly documented," explains Terry Higgins.

"Lenders need to ensure that the funds are legitimate and not loans in disguise, which could affect affordability calculations. Without clear evidence of the source and nature of the gift, applications can face delays, additional scrutiny, or even rejection. It’s crucial to work closely with your lender and provide the necessary paperwork to avoid these issues."

Unusual bank transactions

The second most common mistake mortgage applicants make is not keeping track of their bank transactions or failure to address any that might appear unusual.

"Unusual bank transactions can make lenders hesitant because they need to see clear, stable finances. For example, large unexplained deposits, frequent account transfers, or payments to unfamiliar recipients might raise questions. Lenders may ask for more details, which could delay or complicate your application. To avoid issues, keep your transactions straightforward and be ready to explain anything unusual."

Irregular income

Self-employed or freelancing individuals are more likely to have irregular income, but it’s essential to document this income accurately to support a successful mortgage application.

"Irregular income can make it harder for lenders to assess your affordability," says Terry.

"Things like freelance payments, cash deposits or ad-hoc bonuses might seem unreliable without proper documentation. To avoid issues, provide clear records like invoices or tax returns to show your income is consistent over time."

Incorrect address on ID

Our survey found that 12% of respondents have an incorrect address on their photo ID, and 73% have not updated their ID to reflect their current address in the past 6 months. While it might seem like a minor issue, this can significantly affect the outcome of a mortgage application.

“Having the correct address on your ID is essential for a smooth mortgage application process. Lenders use your ID to verify your identity and address, and any discrepancies can raise red flags or cause delays and can often lead to your application being declined. Ensuring your ID is up-to-date shows accuracy and reliability, which are crucial when applying for a mortgage."

Recent job change

Starting a new job can be exciting, but if you're in the middle of a mortgage application, it’s crucial to document every step of your transition from your old employer to your new one.

"Changing jobs during a mortgage application can complicate the process, so it’s vital to keep thorough documentation," says Terry.

 "Lenders need to see evidence of stability and continuity in your income. Providing details like your offer letter, contract, and recent pay slips can help reassure them that your new role won’t impact your ability to repay the loan. The lender may also want to know if you have approbation period with your new employer."

Undisclosed debts

Undisclosed debts, including personal loans, student loans, and Buy Now Pay Later plans, can delay your mortgage application, affect your loan terms, or even result in rejection.

"Lenders need a complete picture of your financial commitments to assess your affordability accurately. Any undisclosed debt discovered later could delay the process, decrease the amount that you can borrow, or even result in a declined application. To avoid these issues, always be transparent about all financial obligations, no matter how small, and ensure all debts are fully disclosed upfront."

Incorrect or incomplete documentation 

Incorrect or incomplete documentation can delay your mortgage application, as lenders may require additional information to verify your financial situation.

"Lenders rely on accurate and complete paperwork to assess your financial situation. Missing documents or errors could lead to a rejection or extended processing times. To avoid this, double-check all forms for accuracy, ensure all required documents are submitted, and communicate promptly with your lender if anything is unclear."

Credit report errors

Although only 29% of applicants are unaware of the potential negative impacts of credit report errors, it's essential for everyone applying for a mortgage to review and correct their credit report.

"Even small inaccuracies, such as incorrect account balances or missed payments, can lower your credit score and affect your eligibility decrease the amount that you can borrow. To avoid this, regularly check your credit report for errors and dispute any discrepancies before applying for a mortgage."

Ensuring your financial documents are accurate and up to date is a crucial step in securing the mortgage you need for your new home. By avoiding common mistakes and addressing any issues early on, you can streamline the process and move one step closer to making your dream home a reality.

Methodology:

We surveyed 500 UK respondents using OnePulse to gauge their understanding of the factors that contribute to a successful mortgage application.