The Most Common Reasons Why Lenders Reject a Mortgage
Applying for a mortgage can be a long and confusing process, but for some having the mortgage approved is easier for some than it might be for others. Whilst there are many hundreds of mortgage products on the market to suit every budget and circumstance, there are several factors that could impact your chances of success.
This article will assess a number of common pitfalls and whilst the list is not exhaustive we would always recommend that you speak to an adviser to best get the product that would match your circumstances.
Here are a few common reasons why a mortgage may be disapproved if you have:
Poor Credit Score, County Court Judgements or Bankruptcy Filings
Whilst it might be possible to obtain a mortgage if you have a poor credit rating, sadly having a County Court Judgement (CCJ) or registered bankruptcy will make obtaining a mortgage difficult.
This is primarily because lenders will use your credit history to judge your ability to service a debt. Missing or making late payments on a prior mortgage, loan, credit card and even a mobile phone bill could also have an impact. Do not worry though – a mortgage may be possible even with a poor credit rating; however, you will be liable to pay higher than average rates.
This will depend upon your exact circumstances. It would be advisable if you fall within this bracket to spend some time improving your credit rating and then applying.
Large Amounts of Outstanding Debts
Broadly speaking, it is possible to obtain a mortgage even if you have a large credit card debt or other form of debt. Whilst lenders may be reluctant to grant a mortgage if you have large outstanding debts, this is primarily because they will assess your ability to repay a mortgage based upon your ability to service repayments. Unless you have a large and secure income that could offset this worry, it is important therefore to have as low a ratio of personal debts as possible.
No Record of Being on the Electoral Roll
Often overlooked, this is an important and easy to remedy pitfall. Lenders will look to quickly identify you and as such not being on the electoral roll will hamper their ability to confirm who you are. Whilst not a clear rule-out, it may slow the process.
No Credit History or are Applying for a Mortgage with a Limited Credit History
Your lender, like an employer will wish to assess your reliability to service your debt to them and as such if you have a limited or non-existent credit rating you will need to spend some time building a credit history before making an application.
Applied to Borrow Too Much
This is a straightforward consideration – how much you apply for should relate to how much you can afford to repay and must always be related to the level of property values. If you apply for more it is likely you will be rejected.
Opted to Buy a ‘Non Standard’ Property
What type of property you are looking to buy will also have an impact on what decision your lender of choice will make.
There are a number of properties that a lender will find more appealing over others. For example, some lenders will opt for ex-local authority housing as they are often cheaper than other open market properties and can lead to a long term relationship with you, as you move up the property ladder however others may not as the returns are lower.
Where your property is located as well as neighbourhood issues, security and crime considerations will also be taken into consideration.
Major Life Events
We all have major life events that impact our work, business and financial lives. From bereavement to divorce and other life upheavals, this can impact our financial commitments severely and lenders like stability and can impact your ability to access a mortgage.
Having children as well can play a role as lenders will assess every facet of your finances – childcare and support can be expensive, and this will be taken into consideration. If a major life event occurs once approved however and you need financial assistance or a renegotiation of your lending facilities, your lender may be able to come to an agreement with you.
A History of or Are Self Employed
Self-employment can offer many work-life advantages, however lenders will often opt to lend to those with a strong employment background as self-employment can lead to inconsistent income levels, whereas those employed can readily offer evidence of pay slips and monthly income.
If you are self-employed however and are hoping to buy a home, it is vital to compile a convincing document pack that proves your past income and future opportunities for payment. Most lenders will want to see at least two years’ worth of accounts.
An Inaccurate Application
It may sound obvious, but lenders will scrutinise every element of your application, so it is best to pay very close attention tot eh accuracy of your application!
Applying to the Wrong Lender
We would always insist that you take financial advice when applying for a mortgage! It is a tough process, and an experienced adviser will be able to easily identify the right product for you.
How Fintuity Can Help You Access the Mortgage of Your Choice
As a digital IFA, Fintuity is well placed to help you access the mortgage of your choice. If you are looking for any assistance with your mortgage application please do book your complimentary consultation with a member of team of experts to assess your circumstances, as well as the options open to you!