When applying for a mortgage it is very important to know all the common reasons on why lenders will fail you. It is always stressful when applying for your first home mortgage, there are certain red flags that will make lenders less likely to borrow you money. If you get rejected for a mortgage it can impact your credit score and makes you less likely to get accepted by other lenders or mortgage providers, so it’s absolutely important to do your research and to get it right the first time.
1. YOU HAVE POOR CREDIT RATING
Not all lenders think the same way, they have different ways of making decisions to decide to give you a mortgage or not. All of them will always look at the same key factor to help them decide if they will accept your mortgage application.
These can include: * Your credit history eg: CCJS & IVAS. * Information you have given your lender doesn’t match with your credit report. * How much you owe on credit cards and if you have missed any payments. * If your registered to vote. * Information they may already hold on you ( If you have a bank account with them).
Having a poor credit rating will make you less likely to be accepted for a mortgage. Even if you have no previous credit rating it can be even harder as the lender will have no historical evidence to show your good at paying of debts.
2. MORTGAGE AFFORDABILITY
Lenders will look into whether you can afford your mortgage before they lend you the money. They will look into how much you earn and how much you pay out every month. If your income is not high enough and you have other debt commitments they will fail you as you might not have enough money to cover your mortgage payments. Lenders won’t just look into how much you pay out every month they will take into consideration your spending habits like food, clothes and bills etc.
3. YOU MOVED AROUND TOO MUCH
Moving home quite often can make you fail a mortgage application, lenders like to see stability in both your residence and employment. Periods of unemployment can decline you from getting a mortgage. Having gaps between property moves can also decline your mortgage.
4. NOT REGISTERED TO VOTE
Lenders can decline you because if you are not registered to vote, the lender will need to confirm who you are and where you live etc and when your not registered to vote they won’t be able to confirm this. Registering to vote increases your chance of getting a mortgage and can improve your credit rating. One way lenders check this is via the electoral roll.
5. TOO MANY CREDIT APPLICATIONS
When you apply for multiple credit cards and banks with overdraft availability it will show up on your credit file. Lenders will think that many credit applications you have done will make it look like you have debt problems or can’t afford to live on your monthly salary.
6. PAYDAY LOANS
Payday loans to lenders can be a big no no! If you have had any payday loans in the last six years they will be on your credit file. Even if you have paid the loan off on time with no late payments, it could still affect you as lenders will think you won’t be able to cope with the financial responsibility of having a mortgage. Different lenders will differ of having a payday loan on your credit file and this won’t necessarily mean you will be turned down for a mortgage.
7. YOUR SELF EMPLOYED
Being self employed might affect your mortgage application as you will have to show a steady income, by showing your tax statements and business accounts for at least the previous two or three years. You might also have to show evidence that you have secured work contracts for the future. Different lenders will have different opinions and decisions on this. There is plenty of lenders out there that only help self employed mortgage applications, all you have to do is look online and do some research.
8. A MISTAKE ON YOUR CREDIT FILE
If you have applied for a mortgage and have failed it, it could be because of a mistake on your credit file or mortgage application. Lenders will scrutinise every bit of detail or information you have given them. Make sure you check if everything is correct even double check it to make sure and make sure it matches what you have got on your credit file. You can ask your credit file company to remove any mistakes or wrong information on there. Always be honest and declare the correct information to your lender.
9. BUYING A ‘NON-STANDARD’ PROPERTY
The type of property you are looking to buy could affect the success of your mortgage application. A non-standard property could be: Ex local authority housing, Log-style cabins and Prefabricated concrete houses etc. Buying a non-standard property can be appealing as some of these types of homes can be cheaper than standard property homes. Standard houses have brick or stone walls with a roof made of slate or tile. Most lenders are somewhat reluctant to grant mortgages on these types of property as they are considered more likely to lose value over time. You can also find it difficult to mortgage a flat above a commercial premises like: Shops, pubs or restaurants. Buying a property above a commercial premises are at a greater risk of being affected by things like: Noises, smells, rubbish and security issues which can also bring the value down. There are certain mortgage lenders you can find that will accept ‘non-standard’ properties and ones that are above commercial premises.
10. YOU HAVE APPLIED TO THE WRONG LENDER
Your finances could be in spectacular order an your credit file be squeaky clean, but if you don’t tick all the lenders boxes all of this will be for nothing and could risk you not getting a mortgage from another lender. Every lender has a certain criteria of the type of customer they want to lend to, not every customer will fit in there specific criteria.
For example: * You want to borrow too much or too little (even if you can afford it some lenders won’t consider you). * Your self employed. * Your too young or too old.
Rather than taking a risk and failing a mortgage application, seek advice from a mortgage expert that can access your circumstances and they can try to match you to the best possible lender.
GOOD LUCK ON YOUR MORTGAGE APPLICATION!!