The path to finding the perfect home can be a long one. There is much you need to consider in your search, from the type of house that ticks all of your boxes to the neighbourhood that you will eventually move into. Thankfully, a good estate agent can point you in the right direction but even when you have found a place to live, there is something else to consider: the expense. If you can’t afford to buy the property outright (and not many people can), you are going to need a mortgage.
What if the mortgage lender turns down your application?
Sadly, this could happen and if you relate to anything in our article on ‘what stops you getting a mortgage,’ it could happen to you. Thankfully, a mortgage advisor at YesCanDo Money is here to help you, so please get in touch if you need our advice and support. But in the meantime, consider the following as these are just some of the factors that could affect your mortgage application.
What can stop you getting a mortgage?
You can find mortgage lenders online or on your local high street and each one of them will be trying to lure you in with an attractive mortgage deal. But after assessing your application, they might have reason to deny you a loan.
There are all kinds of reasons why you might get your mortgage application rejected and it’s worth knowing about each one of them. After all, the better educated you are, the more you can do to improve your chances of having your mortgage application accepted. So let’s have a look at what stops you from getting a mortgage.
Failed affordability checks
It would be foolish to get a mortgage that you can’t afford as you could find yourself in serious financial jeopardy down the line. You might even lose your house if you fail to make your mortgage repayments on time. So, before you borrow money, you do need to consider which mortgages you can and cannot afford.
Thankfully, mortgage providers put affordability checks in place before they lend people money. As part of their affordability assessments, they will take into account your income and expenditure after you send in your application form. If the loan you apply for exceeds a particular multiple of your income (usually 4.5 times your income although mortgage criteria can differ), they will probably dismiss your application.
As part of their eligibility criteria, there are other aspects of your finances the lender will take into account too, as we discuss below. But the bottom line is this. If the lender suspects you will have difficulty keeping up with your monthly repayments, your application is likely to get turned down.
Too much debt
You will already appreciate the problems that too much debt can cause. It can limit your finances, cause you massive amounts of emotional stress. It can also affect any mortgage applications you make when trying to get on the property ladder.
As part of the lender’s criteria, your debt will be taken into consideration. We aren’t only talking about the outstanding debt you owe from payday loans, previous bank loans, credit cards, etc, but also the amount of debt you might own in the future. So, if you have an unused overdraft or a credit card that you haven’t touched, the mortgage provider will consider how they might affect your financial situation down the line.
A low credit score on your credit report or bad credit history
There are all kinds of reasons for a low credit score.
If you have struggled with your finances in the past and failed to make previous debt payments on time, your credit rating will be negatively affected. Learn what credit score is needed to buy a house.
Declarations of bankruptcy, county court judgements, and IVAs (individual voluntary arrangements) will also affect your score. These stay on your credit file for around six years so during this time it is usually unwise to make a mortgage application.
You may also ask. Does getting rejected for a mortgage affect your credit score? Some lenders use a soft footprint when you apply for a decision in principle so this will be your prefered route and therefore get advice from a mortgage broker or mortgage adviser.
No credit history
You will also have a low credit rating if you have no credit history at all. Lenders will want to know that you’re a responsible borrower before lending to you so it’s wise to pursue sensible forms of credit before your application. However, too many credit applications can affect your score so you shouldn’t go overboard.
If you have a bad credit score, for any reason, it’s in your best interest to improve it as soon as you are able. This isn’t to say every mortgage lender will turn you down if you have a poor credit score but the majority will. You can check your credit report through any of the credit reference agencies that are available online, such as Equifax and Experian. If you spot any glaring errors on your report, get in touch with them as soon as possible.
Mistakes on your mortgage application
When you apply for a mortgage, you must make sure that all of the information you provide on the form is correct. If there are any omissions or discrepancies, the lender will either reject it or contact you for further information. In the case of the latter, this will delay your chances of getting a mortgage.
You have moved around a lot
When assessing mortgage applications, lenders like to see stability. If you have changed jobs or moved addresses several times, you are unlikely to get your mortgage application approved. When possible, you should try to stay in the same job and property for at least a year before you think about getting a mortgage.
You’re not on the electoral roll
If you don’t fill in the annual voter registration form (the document that ensures you’re on the electoral roll), you won’t be eligible to vote and you might end up with a fine. Not being registered can also affect your chances of getting a mortgage or any other type of loan and it can have a negative impact on your credit report too.
Not having enough money for the deposit
Before applying for your mortgage, you must do what you can to save up for the mortgage deposit. Most lenders will ask for at least 10% of the overall value of the loan (loan to value) although there are those who accept 5%. If you want to access mortgage deals with the best interest rates, it’s worth saving up for a deposit that is more than 10%.
If you aren’t able to meet the minimum deposit requirements, your application won’t progress far. You then have a number of choices. You could make an effort to save, perhaps by reducing some of your outgoings. You could search for a cheaper property or a lender who is prepared to take a smaller deposit. You could extend the mortgage term if the lender allows it. Or you could consider a guarantor mortgage if you have a family member that is willing to help you out financially.
You have applied to the wrong mortgage lender
In some cases, your mortgage application could be squeaky clean. You might have an excellent credit history, with enough money saved up for the deposit and evidence of a stable income. However, you might still get your mortgage application declined. Why? Well, lender’s have their own eligibility criteria and while we have covered some aspects here, there could be other reasons why your application is off-putting to them. It might be because you’re too young or too old. Or you might be self-employed rather than employed, for example.
So, while there are some obvious reasons as to why your application might get turned down, lenders don’t always have a hard and fast rule when it comes to who they will or won’t lend to. This can be frustrating, especially if you have made every effort to improve your situation.
Rather than risk getting turned down by a lender, for an obvious or unobvious reason, get in touch with our team. We can put you in touch with those lenders who are more likely to accept your application and can search for deals with the best interest rate for your specific mortgage situation.
MORTGAGES: WE'LL DO IT ALL FOR YOU
How To Get a Mortgage
Getting a mortgage is rarely as simple as filling out the application form and waiting for the money to roll in, as we think we have demonstrated. A poor credit history, a lack of consistent income, and simply being self-employed, are just some of the reasons why your application might get turned down. It can be incredibly frustrating. However, to improve your chances of getting a mortgage, there are a few things you can do.
Improve your credit score
You can’t fix your credit score overnight. However, you can take a look at your credit report online and if it’s anything less than ‘good,’ you can take steps to improve it. For starters, you should check the report for any errors and if you spot any, you should contact the credit agency to let them know. You should also:
- Pay your bill payments on time (including your loan and credit card payments)
- Limit new credit applications
- Consolidate existing debt
- Apply for a credit card if you have no credit history at all
- Check inactive bank accounts for a negative balance
There is a lot more information online and a quick Google search will point you in the right direction.
Register to vote
If you haven’t already done so, now is the time to register. Lenders use the electoral roll to make sure you are who you say you are, so contact your local council for a form or register online. – https://www.gov.uk/register-to-vote
Get your finances in order
Look through your bank statements and assess your outgoings. The more you can do to eliminate or reduce these the better, as you will have more money to save for your deposit and the lender will think better of your financial position. Do what you can to stay out of your overdraft too and resist the urge to take out a payday loan to manage any debt.
Fill out the application form correctly
As we suggested earlier, mortgage lenders will turn down an application if there are any glaring errors. Therefore, get everything right on the form, from your personal details to the information you provide about your spending. Be honest as any mistruths on the form, even if you think they might work in your favour, will come back to bite you when the lender checks and verifies the information you have provided.
Choose lenders wisely
If there is a chance that your application might get turned down, perhaps because you’re self-employed or because you have bad credit, do your research before choosing a lender. You can improve your mortgage chances by applying to those lenders that tailor their services to meet your particular set of circumstances. Mortgage brokers are in a prime position to help in this regard, especially when you choose to use a ‘whole of market’ broker such as ourselves, so get in touch with our team for the tailored advice we can offer you.
How A Mortgage Broker Can Help
Have you had your mortgage turned down? Or are you worried that this could happen to you? If so, consider the mortgage advice and support from a mortgage adviser from our team at YesCanDo Money. As a fee-free mortgage broker, there is no charge for any of our services, so you can benefit from the skills of an experienced mortgage advisor without having to worry about any hidden or upfront costs.
What can a whole of market broker do for you?
As ‘whole of market’ mortgage brokers, we have access to both well-known and specialist mortgage providers. This gives us the opportunity to tailor our services to your particular needs so even if you have been turned down for a mortgage, we might still be able to find you a great mortgage deal from other lenders elsewhere.
We will also give you advice on the steps you need to take to improve your chances of a successful mortgage application. When a lender has been found, we will then give you all the help you need with the application and paperwork. As part of our services to you, we will also liaise with the mortgage lender and your solicitor and estate agents, to ensure a stress-free and hassle-free experience.
So, if you would like to apply for a mortgage, get in touch with us today and book an appointment with a knowledgeable mortgage adviser from our expert team.
A question that our advisors get asked a lot is does having a student loan affects you getting a mortgage? We have the linked guide to explain this answer for you.
