Mortgage lenders have toughened their rules in recent years, meaning the application process has become more rigorous. Here's the heads-up on some of factors which can lead to a rejection to help you improve your chances of being accepted
Anyone who has ever applied for a mortgage – particularly for the first time – has no doubt worried they might be rejected.
Indeed, the stress of getting that all-important approval can be just as draining as the rest of the house buying process.
Lenders, of course, want borrowers who are reliable and therefore they often have very rigorous processes in place to vet potential customers. There are several red flags they are looking out for which, if spotted, may make them less likely to lend you the money they need.
Experts at www.onlinemortgageadvisor.co.uk have outlined some of the most common red flags that may make raise eyebrows amongst the lenders.
It’s worth being aware of some of these factors because being rejected for a mortgage can negatively impact your credit rating. And, this can make it even less likely for other banks or mortgage lenders to accept your application in the future.
Here are some of the reasons you may be rejected:
1. You have a poor credit history
This is a pretty obvious one, but a bad credit history means potential lenders will worry about your ability to manage your debts and pay back your mortgage on time.
Even if you have no credit rating at all, it can be harder to get a mortgage as lenders have no evidence to prove that you’re good at paying your debts off.
2. You don’t earn enough
Affordability is one of the biggest factors that a lender will take into consideration when deciding whether to lend to you.
On average, mortgage lenders will offer mortgages based on 4.5 times your salary, so, ensure that the amount you’re asking for is reasonably in line with the amount of money you have coming in each month before submitting the application.
3. You’ve used ‘buy now, pay later’ schemes
Buy now, pay later schemes such as Klarna and Clear Pay are a relatively new phenomenon, and mortgage lenders don’t particularly like them.
Lenders are cautious when seeing Klarna on statements as it may suggest someone is living beyond their means, even if they do make their payments on time.
4. You only have a small deposit
If your deposit is very small, around 10% or less, it may mean you’re less likely to be accepted for a mortgage, and if you are, the rates won’t be fantastic.
When you have a small deposit, your lender will have to put more towards the property meaning they could be concerned about you repaying this back. Ensure that you’ve taken your time to save up as much as you can to have a bigger deposit.
5. You’ve taken out a payday loan
Even if you pay them on time, payday loans are listed on your credit file for six years, and some lenders may think that a payday loan means you’ll struggle to manage your money and therefore pay back the mortgage.
Make sure that the loan is paid off in full before you apply for a mortgage and speak to a broker to see which providers will be willing to offer you the money you’re asking for.
6. You’re not registered to vote
Mortgage lenders will use the electoral role to make sure that you are who you say you are. Registering to vote boosts your credit score and increases your chances of getting a mortgage. Additionally, the longer you stay at one address, the better, as it will show the lender that you have stability.
