Mortgage lending decisions involve several independent assessments that must all pass.
Affordability
Income against committed outgoings, stress tested at higher rates.
Which is the most common reason for refusal.
Credit assessment
History of managing borrowing.
The property valuation
Lender's own assessment of what the property is worth.
Which can come in below the agreed price.
Deposit and loan to value
Proportion borrowed determining available rates.
The stage most applications fail at
Affordability, calculated from documented income against committed outgoings and stress tested at rates above the one being offered.
Which catches applicants who could comfortably make the payment at current rates but not at the tested one.
Existing credit commitments reduce borrowing capacity considerably, including ones with small monthly payments.
Agreement in principle
An indication rather than an approval.
Which is useful for house hunting and is not binding.
Documentation
Payslips, accounts, bank statements and identity checks.
Which delays applications when incomplete.
Self-employed applicants
Assessed on filed accounts over several years.
Improving your position
Reducing commitments and keeping accounts orderly for several months beforehand.
What lenders are actually protecting against
Borrowers who cannot maintain payments if circumstances change, and properties that would not cover the debt if sold.
Which is why affordability is stress tested and why the lender values the property independently.
Both requirements were tightened substantially after the financial crisis, and the current rules reflect that.
Deposit sources
Gifted deposits requiring documentation.
Which anti-money-laundering rules mandate.
Property types
Construction, tenure and use affecting lending appetite.
Which catches buyers of unusual properties.
Brokers
Access to lenders and criteria knowledge.
Which is useful for non-standard cases.
A general note
Rules differ by country and this is description rather than financial advice.
Preparing properly
Reduce other credit commitments, avoid new applications, keep accounts orderly, and gather documentation before applying.
Which addresses the things assessments actually look at.
Starting several months ahead makes a material difference, particularly to the affordability calculation, where every existing monthly commitment reduces what can be borrowed.
Joint applications
Combined incomes and combined commitments.
Which can help or hinder.
Rate types
Fixed, variable and tracker products.
Which is a risk decision.
Fees
Arrangement, valuation and legal costs.
Which belong in the comparison.
A general note
Mortgage regulation differs substantially by country and this is description rather than advice.
Why it is worth knowing how these things work
Most of the systems that shape ordinary life are invisible by design. Nobody explains why a parcel took an odd route, why a film left a streaming service, why a wait in an emergency department extended, or why the price of a flight changed between two searches.
The absence of explanation is rarely deliberate concealment. It is that the people running these systems are solving their own problems, and the reasoning behind their decisions is obvious to them and completely opaque from outside.
Understanding the mechanism does not always change what you can do about it. It does remove a category of low-grade frustration that comes from assuming something is arbitrary, unfair or aimed at you personally when it is usually none of those things.
A note on sources
Where regulation is involved, national regulators publish the actual rules and they are generally clearer than press coverage of them. Where an industry is involved, trade publications aimed at people working in it are considerably more informative than consumer coverage.
Practices described here vary substantially between countries, and anything with legal, financial or medical consequences warrants checking against the rules that apply where you are.
The pattern that recurs
Across almost all of these systems, the same three things turn out to be true. The behaviour that looks irrational from outside is optimising for something the observer cannot see. The cost that seems unexplained is usually concentrated in one specific stage of the process. And the information that would resolve the confusion is generally published somewhere and read by nobody.
That last point is the most useful one. Regulators, operators and industry bodies publish an enormous amount of explanatory material that answers exactly the questions people complain about not being able to get answers to. It is dry, it is not promoted, and it is free.
What to do with any of this
Very little of it changes a decision on its own. What it changes is the ability to ask a better question: of a company, of a service, of a regulator, or of yourself before assuming that something went wrong.
A final caveat
Everything above describes general practice. Individual companies, jurisdictions and circumstances differ, sometimes substantially, and the rules change more often than summaries of them get updated.
Where a decision matters, the official source for your own country is worth the ten minutes it takes to check.
Where to read further
Trade publications written for people working in an industry are consistently the most informative public source on how it operates, and most of them are freely readable.
They assume knowledge that general coverage explains and skip the framing that general coverage adds, which makes them harder to start with and considerably more useful once you do.