Why was your mortgage application rejected by the bank? 5 common reasons.

Last month, my client Kelvin finally saved up enough for the down payment and was ready to buy his first property. He signed the provisional agreement with great excitement and paid the deposit, fully believing that the mortgage application was just a formality. Who knew, two weeks later the bank called: 'Sorry, your mortgage application has not been approved.'

Kelvin was stunned on the spot. He had a stable monthly income and a good credit record, so why was he rejected? Worse yet, the agreement had already been signed, and if the mortgage wasn't approved, he could lose the deposit at any time, with losses potentially amounting to hundreds of thousands.

This story is not an isolated case. According to data from the Hong Kong Monetary Authority, about 5-8% of mortgage applications in Hong Kong are rejected or require significant adjustments to the loan amount each year. Many prospective buyers think that 'having money for the down payment guarantees mortgage approval,' only to find out at the last minute that there are problems, leaving them in a dilemma.

In today's article, I will use my 15 years of experience in the real estate industry to break down the 5 most common reasons mortgage applications are rejected and teach you how to avoid these pitfalls. Whether you are a first-time homebuyer or an owner preparing to refinance, this insider knowledge can help you increase your mortgage approval rate and complete your transaction smoothly.

Reason 1: Contribution to Income Ratio (DSR) Does Not Meet the Standard

What is DSR? Why do banks value it so much?

The debt servicing ratio (DSR) is a key indicator used by banks to assess your repayment ability. Simply put, your total monthly debt payments should not exceed a certain percentage of your monthly income.

According to the HKMA guidelines, under normal circumstances:

Owner-occupied property: DSR cap is 50% (before stress test)
Stress test: Assuming interest rates rise by 3%, DSR must still not exceed 60%

:::tip Insider Tip Many people think 'earning enough per month to cover the mortgage is enough,' but actually banks will calculate all your debts, including credit card installments, personal loans, car loans, student loans, and even mortgage payments for other properties. If you have multiple credit cards and only pay the minimum payment for a long time, the bank will consider your credit card debt as 'long-term debt,' significantly increasing your DSR. :::

Real Case: Credit Card Installments Become a Fatal Weakness

I have a client, Michelle, who earns 40,000 a month. She wants to buy a 5 million unit with a down payment of 1.25 million (25%) and apply for a 3.75 million mortgage. Logically, based on her income, the repayment should not be a problem.

But when the bank was reviewing the application, it was found that she had:

Credit card installments: 8,000 NT$ per month
Personal loan: 5,000 NT$ per month
Car loan: 4,000 NT$ per month

With the new mortgage monthly payment of about 15,000 yuan added, the total debt repayment reaches 32,000 yuan, with a DSR as high as 80%, far exceeding the HKMA limit. The result? The mortgage was rejected.

How to avoid exceeding the DSR?

Repay short-term debts in advance: Try to clear high-interest debts such as credit card installments and personal loans 3-6 months before applying for a mortgage.
Increase guarantors: If parents or spouse have stable income, consider adding them as guarantors to improve overall repayment capability.
Extend the repayment period: Lengthen the mortgage term to 30 years to reduce monthly payments and improve the DSR.
Reduce the loan amount: If the DSR is really too high, it may be necessary to increase the down payment and reduce the mortgage loan amount.

Reason 2: Problems with Credit Rating

How does TU (TransUnion Credit) scoring affect mortgages?

In Hong Kong, banks always check your TransUnion credit report (TransUnion, abbreviated as TU) when approving a mortgage. TU scores range from A to J, with A being the best and J being the worst. Generally speaking:

A-C: Mortgage approval is smooth and you can enjoy the most favorable interest rates
D-F: Mortgage may be rejected, or you may need a higher down payment or an additional guarantor
G-J: It is basically very difficult to get mortgage approval

:::warning Common Misconceptions Many people think 'I have never been in debt, so my TU score must be very good.' Wrong! If you have never used a credit card or a loan, banks actually cannot assess your repayment ability, and your TU score may be 'no record' or relatively low. Using a credit card appropriately and repaying on time is the only way to build a good credit history. :::

5 Behaviors That Can Drag Down Your TU Score

Late repayment of credit cards or loans: Even being late by just one day can leave a negative record.
Long-term maxing out of credit cards: Using over 50% of your credit limit is considered a sign of financial stress.
Frequent applications for credit cards or loans: Multiple inquiries on your TU in a short period may lead banks to suspect you urgently need cash.
Paying only the minimum payment: Consistently paying only the minimum will make banks think you lack repayment ability.
Guaranteeing for others: If the other party defaults, your TU score will also be affected.

Practical Tips: How to Improve TU Scores?

If your TU score is not ideal, don't be discouraged. Here are some practical methods:

Pay on time: This is the most basic and important. Set up automatic transfers to avoid forgetting.
Lower credit utilization: Try to keep credit card debt within 30% of your credit limit.
Avoid frequently applying for credit cards: Each application leaves an inquiry record, affecting your score.
Regularly check your TU report: You can check it for free once a year to ensure there are no errors.
Pay off old debts: Prioritize high-interest debts, such as credit card debt and personal loans.

:::success Expert Opinion I suggest that all potential buyers check their TU report 6-12 months before planning to buy a property, so they can identify problems early and make improvements. Many people only discover issues with their TU after signing the preliminary agreement, and by then it is already too late. :::

Reason 3: Insufficient or Unstable Proof of Income

What income proofs does the bank accept?

When the bank approves a mortgage, it needs to verify that your income is genuine and stable. Commonly accepted proof of income includes:

Pay Slip: Pay slips for the last 3-6 months
Bank Statement: Showing monthly salary records
Tax Form (IR56B / Tax Return): Proving annual income
Employment Contract: Proving employment relationship

:::highlight The dilemma of self-employed individuals / freelancers If you are self-employed, a freelancer, or your income mainly comes from commissions or bonuses, applying for a mortgage will be much more difficult than for salaried employees. Banks usually require you to provide tax returns for the past two years and will 'discount' your income when calculating it (for example, only counting 70-80%). :::

Real Case: Commission Income Not Being Calculated

My client Jason is a real estate agent, earning 80,000 to 100,000 per month, but most of his income comes from commissions. When he applied for a mortgage, the bank was only willing to consider his base salary (15,000 per month), and his commission was not accepted because it was 'unstable.' As a result, his mortgage approval amount was significantly reduced, and he had to have his parents act as guarantors in order to successfully buy a property.

How to Improve the Credibility of an Income Certificate?

Prepare documents in advance: Don’t wait until signing the provisional agreement to start preparing; organize all documents 3-6 months ahead.
Choose a "salary account" to apply for a mortgage: If your salary has been deposited into a particular bank for a long time, that bank is more likely to approve your mortgage.
Provide proof of additional income: If you have rental income, investment returns, etc., provide the relevant proof documents.
Consider adding a guarantor: If your own income proof is insufficient, you can ask your parents or spouse to act as a guarantor.

Reason Four: Issues with the Property Itself

Types of Properties That Banks Are Unwilling to Finance for Mortgages

Many people think, 'As long as I have money, I can buy any building.' Wrong! Banks are very cautious about certain types of properties and may even refuse to provide a mortgage:

Village Houses: Especially Ding Houses and ancestral hall land; bank valuations are conservative, and mortgage ratios are relatively low.
Tong Lau (Old Residential Buildings): Buildings that are too old (over 50 years), without elevators, with serious unauthorized building issues.
Industrial Buildings / Shops: Mortgage ratio is at most 40-50%, interest rates are relatively high.
Haunted Houses: Bank valuations will be significantly reduced, making mortgage approval difficult.
Unpaid Land Premium Home Ownership Scheme / Public Housing: Requires Housing Authority guarantee, with specific restrictions.

:::warning The Trap Behind Xun Pan Some "bargain" properties on the market are particularly cheap, but the reason behind them may be that banks are unwilling to approve a mortgage for them. Buyers may only find out after signing the contract that the mortgage cannot be approved, resulting in the termination of the agreement and losing the deposit. Therefore, when seeing a "bargain price," it is essential to first clarify the bank’s valuation and mortgage approval situation. :::

How to avoid buying a property that you can't make a bid on?

Get an appraisal before signing a provisional agreement: Approach 2-3 banks for a preliminary appraisal to confirm the chances of mortgage approval.
Check property records: Review records at the Land Registry to ensure there are no unauthorized structures or covenant violations.
Choose mainstream properties: If it is your first home purchase, it is recommended to select mainstream estates or private flats and avoid niche properties.
Reserve a backup plan: If the property has potential risks, consider applying for mortgage insurance or increasing the down payment.

Reason Five: Improper Timing of Application or Incomplete Documents

The 'Golden Time' for Mortgage Applications

Many people think that 'you can apply for a mortgage after signing a provisional agreement,' but in reality, mortgage approval takes time, and if the timing is not right, you might not meet the completion deadline.

Generally speaking, mortgage approval takes 2-4 weeks. During peak seasons (such as the end of the year or before the Lunar New Year), the approval time may be longer. I recommend:

Before signing a provisional agreement: first conduct a preliminary valuation and income assessment
After signing a provisional agreement: immediately submit the formal mortgage application
2 weeks before completion: ensure that the mortgage approval letter has been issued

:::tip Insider Tip If your mortgage application is more complicated (for example, self-employed, multiple sources of income, or the property has potential issues), it is recommended to start preparing 1-2 months in advance and apply to 2-3 banks at the same time to increase the chances of success. :::

Common Issues with Incomplete Documents

When a bank approves a mortgage, if the documents are incomplete, they will ask you to provide the missing ones, which will slow down the approval process. The most common missing documents are:

Payslips from the last 3 months
Bank statements from the last 6 months
Copy of ID card
Proof of address (utility bills, bank statements, etc.)
Copy of temporary sales contract
Property valuation report

How to Ensure a Smooth Mortgage Application?

Prepare a list of documents in advance: Request a complete list of documents from the bank or mortgage broker and prepare them item by item.
Keep documents up to date: Ensure all documents are from the last 3-6 months.
Proactively follow up on progress: Call the bank every few days to check progress and make sure nothing is missed.
Have a backup plan ready: If the main bank has difficulty approving, immediately apply to other banks.

Summary: 5 Key Factors to Increase Mortgage Approval Rates

Returning to the beginning of the article with Kelvin's story. Later, with my assistance, he repaid part of his debt, improved his DSR, and added his parents as guarantors, eventually successfully getting approved for a mortgage and smoothly purchasing a home.

Having a mortgage application rejected is not the end of the world; the key is to understand the bank's approval logic and prepare in advance. Here are the five key points I have summarized:

Control DSR: Repay high-interest debt in advance and ensure the repayment-to-income ratio is within a safe range.
Maintain a good TU score: Make payments on time and avoid frequently applying for credit cards or loans.
Prepare sufficient income proof: Organize payslips, bank statements, tax documents, and other relevant papers.
Choose an appropriate property: Avoid unpopular or high-risk properties and get an appraisal before signing.
Seize the right time to apply: Prepare in advance and allow enough time to handle unexpected situations.

:::success Confidence for the reader Although the Hong Kong property market is complicated, as long as you do your homework, mortgage approval is actually not as difficult as imagined. I have seen countless clients go from 'mortgage rejected' to 'successfully buying a home'; the key lies in whether you are willing to spend time understanding the rules of the game and preparing in advance. :::

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Remember, getting on the property ladder is not a dream. As long as you are well prepared, the doors of the bank will always be open to you. Wishing you early success in buying a home, with mortgage payments cheaper than rent!