What Mortgage
No Result
View All Result
what MORTGAGE Awards
  • Login
  • Register
Add Listing
  • Home
  • News
  • Buy-to-Let
  • Homeowner’s Hub
  • Equity Release
  • wM Awards
  • First-Time Buyer
  • Home
  • News
  • Buy-to-Let
  • Homeowner’s Hub
  • Equity Release
  • wM Awards
  • First-Time Buyer
No Result
View All Result
What Mortgage
No Result
View All Result
Home News First-time buyers

Why being self-employed during pandemic equals mortgage rejection for many

by Kate Saines
November 2, 2020
Lenders slammed for snubbing borrowers’ evolving needs
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

This is according to a survey of 1,000 prospective buyers conducted by lender, Aldermore Bank, which also found as many as one in 10 respondents had been turned down for a mortgage more than once.

Its First Time Buyer Index revealed the most common reason for rejection was being self-employed or a contract worker. Indeed, as many as 23% of those quizzed admitted they had given up their self-employed status in order to secure themselves a mortgage.

And it would seem Covid has exacerbated problems for self-employed mortgage seekers as Aldermore’s research showed back in March, being self-employed was the ninth most common reason for being rejected.

Today it’s the top most likely reason for a mortgage being declined.

Credit rating

There were also major concerns about credit ratings with a third of first-time buyers trying to boost their prospects by taking steps to improve their credit score.

Related Articles

  • Confused over life insurance jargon – what do the terms mean?
    April 24, 2025
  • Leasehold reforms: How will they impact your home purchase?
    April 16, 2025
  • What factors qualify someone as a first-time buyer?
    April 15, 2025
  • Divorce: Can I release equity to buy out my wife?  
    April 14, 2025

Over half were ensuring they paid bills on time as part of their bid to increase their score. Meanwhile, over a third (34%) were actively paying off debt, and nearly one third (29%) registered onto the electoral roll to raise their rating.

Other credit score improvement initiatives included closing unused credit cards (19%), reducing an overdraft (18%) and seeking debt advice (7%).

Don’t give up hope…

Jon Cooper, head of mortgage distribution, Aldermore said: “A decline for a mortgage can be a deflating experience for those looking to fulfil their dreams of home ownership, but do not despair as options for first-time buyers and the self-employed have broadened over the past decade.

“The growth of specialist lenders, who can handle more complicated applications, have allowed for credit issues to not be as much of a significant barrier to buying a home as it was before.”

Indeed, Aldermore explained the current generation of first-time buyers were now far more diverse, coming to the market with a wide range of financial backgrounds. However there was one constant – namely, they all appear to find the process confusing and complicated, and the pandemic has only heightened this.

Cooper added: “It may feel daunting at times so we would recommend seeking advice from a mortgage broker that can give a whole of market view and provide options specific to a new buyers’ individual circumstances.”

If you are struggling to take out a mortgage because you are self-employed or have a low credit rating, Aldemore has come up with some advice to help you improve your chances.

Aldermore Bank’s top tips to help secure a mortgage

If you are… self-employed

In these uncertain times there may be some self-employed who are looking to buy their first home but may have suffered a loss of income this year.

Lenders will fundamentally need to understand if a customer can afford the mortgage repayments and verify their income.

Lenders are currently requesting around two years of accounts in this period but will accept pre-Covid income based on the latest tax year (April 2019 to April 2020).

Lenders will then look to verify how the customer can afford the mortgage payments if their income has been impacted and whether income will return to expected levels or be different going forward.

Anyone self-employed who has had their income affected by Covid-19, should provide as much information to their broker or lender, who will outline options and clarify any further action needed.

If you are … a first-time buyer

No matter how early in the process you are, we would encourage you to go seek advice from a broker.

Our research found 91% of prospective first-time buyers found their broker useful but only 14% had used one.

They can give guidance on all aspects of the journey and there is no better time than now to get it, as they will give a whole of market view specific to your individual circumstances.

If you have a smaller deposit, there are less products available than before lockdown, which means many new buyers may have to raise a bigger deposit, but for those with smaller deposits there are still options available such as shared ownership and Help to Buy.

If you have… credit issues

Credit issues can be a huge worry for first-time buyers. There are quick things you can do to improve your credit score such as registering on the electoral roll, closing unused credit cards and paying off an overdraft or student loan.

Every little thing will make it easier to show you can afford repayments and that you are responsible in each commitment. If this is a concern, reach out to a mortgage broker who can provide advice on improving your credit score and explain what mortgage options are available for you.

Credit issues are no longer as much a barrier to buying a home as they were in the past. Specialist lenders will consider borrowers with CCJs and other credit issues.

You may need to pay a higher rate initially but making all your mortgage payments on time will improve your credit rating making it easier to get a better rate when you apply for a future loan.

In addition, the pandemic has caused over 1.9 million to apply for payment breaks, so you are not alone in being affected by this. Given the sheer volume, lenders are likely to be as considerate and understanding as they can in the future when reviewing your finances during this period of time.

People may be asked more questions than normal when applying for a mortgage as lenders are required by the industry regulator to ensure they are lending responsibly.

[box style=”4″]

Need some help with your mortgage?

What Mortgage has teamed up with L&C to offer you expert advice on the right mortgage deal.

Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.

[/box]

Tags: AldermoreCOVID-19credit scoremortgage rejectionself-employed
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

Our recommeded tools

Mortgage Calculators

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Mortgage Best Buys

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Mortgage Match

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Mortgage Search

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Comments 1

  1. John says:
    5 years ago

    Its really helpful content for the people with credit issues.Thanks for sharing.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Related Articles

  • Confused over life insurance jargon – what do the terms mean?
    April 24, 2025
  • Leasehold reforms: How will they impact your home purchase?
    April 16, 2025
  • What factors qualify someone as a first-time buyer?
    April 15, 2025
  • Divorce: Can I release equity to buy out my wife?  
    April 14, 2025

Newsletter

Register for our free weekly newsletter for all the latest mortgage news, tips, and features.

Sign Up

Polls

Will the increase in stamp duty on 1 April 2025 make you less likely to buy a property?

View Results

Loading ... Loading ...
  • Polls Archive
  • Advertise
  • Media Information 2018
  • Contact Us
  • About us
  • Terms & Conditions
  • Essential Links
  • Privacy

what Mortgage, Metropolis International Group Ltd © 2025
Registered in England no. 02916515

[MBM_Form id="284841"]

Buying a property, moving home or re-mortgaging? Sign up to our newsletter and marketing emails, and we'll send all the latest mortgage news, top tips, expert advice and what MORTGAGE Awards updates straight to your inbox.

I am a...*
First Name*
Email*
First Name*
Last Name*
Email*
Company
Job Title
I would like to receive...
[MBM_Form id="284841"]

Buying a property, moving home or re-mortgaging? Sign up to our newsletter and marketing emails, and we'll send all the latest mortgage news, top tips, expert advice and what MORTGAGE Awards updates straight to your inbox.

I am a...*
First Name*
Email*
First Name*
Last Name*
Email*
Company
Job Title
I would like to receive...
No Result
View All Result
  • Home
  • News
  • Buy-to-Let
  • Homeowner’s Hub
  • Equity Release
  • wM Awards
  • First-Time Buyer

what Mortgage, Metropolis International Group Ltd © 2025
Registered in England no. 02916515