A mortgage application is assessed on three separate questions, and failing any one of them stops the loan. Applicants often focus on the first and are surprised by the other two.
Affordability is tested against stressed conditions
Lenders assess income and committed expenditure to estimate what a household can sustain, using evidence rather than declared figures.
The test is usually applied at a rate higher than the one being offered, so the borrower is assessed against the possibility that rates rise during the term.
Variable and self-employed income is treated cautiously, typically averaged over years, because the question is what can be relied upon rather than what was earned most recently.
Credit history answers a different question
Alongside affordability, lenders review borrowing history for evidence of missed payments, defaults and how existing credit is being used.
The two assessments are independent. A high income does not offset recent arrears, and a clean record does not overcome an affordability shortfall.
Recent applications also register, since a cluster of them can suggest either shopping around or difficulty obtaining credit, and the lender cannot distinguish the two from the file.
The property is security and is assessed as such
A valuation is carried out for the lender rather than the buyer, establishing what the property would fetch if it had to be sold to recover the debt.
A valuation below the agreed price reduces the amount the lender will advance, leaving the buyer to fund the difference or renegotiate the purchase.
Some construction types, tenure arrangements and uses are treated as harder to sell, and a lender may decline them regardless of the borrower's circumstances.
Legal title has to be clean
Conveyancing checks that the seller can transfer what they claim to own, and that no undisclosed rights, charges or restrictions attach to the property.
Missing consents for past alterations, short remaining lease terms and access rights over land the seller does not own are common obstacles found at this stage.
These issues are usually solvable through indemnity, retrospective consent or negotiation, but each takes time and can extend a transaction considerably.
An offer is conditional until completion
A mortgage offer is issued subject to conditions and to the circumstances remaining as described, so material changes before completion can cause it to be withdrawn.
Offers also carry expiry dates, and a delayed chain can require reassessment against whatever criteria apply at that later point.
Requirements and terminology vary considerably by jurisdiction and change over time, and anyone assessing a specific application needs advice from a qualified professional in that market.