Getting approved for a mortgage can be challenging, but there are things you can do to boost the chance.
Here, we reveal 10 things that could affect the likelihood of you securing a home loan, and offer tips on how to overcome them.
1) Having considerable amounts of remarkable debt
Generally speaking, you'll be able to obtain a mortgage with credit card debt.
Lenders might be reluctant to grant you a mortgage, however, for those who have large amounts of remarkable debt from unsecured loans and charge cards.
This is because having to pay off other loans will directly impact how much (and whether) you can afford your home loan repayments each month.
For this reason, it’s really important to pay for down just as much debt as you possibly can prior to making a mortgage application.
While your education loan won't be considered the same as other forms of debt, your lender may take it into consideration when working out whether or not you can afford to take out a loan. Read will my education loan affect my mortgage? for more information.
2) Having a bad credit score
If you’ve had a bad credit history, County Court Judgements (CCJs), or a bankruptcy on your record it can be really difficult to get approved for any mortgage.
This is because lenders make use of your credit history to evaluate your ability to stay on stop of debt.
Missing or making late payments on the previous mortgage, loan, credit card or perhaps your mobile phone bill may potentially scupper your chances of being accepted for any mortgage.
All hope isn’t lost for those who have a bad credit rating though, as it may be easy to get approval for a poor credit mortgage.
However, rates on bad credit mortgages can be high, therefore it may be better to spend time improving your credit score and then trying to get a regular mortgage.
3) Without credit rating at all
Applying for a loan with limited or no credit rating is like applying for a job with no CV.
Since your credit rating lets lenders understand how reliable you are at making repayments and handling your debt, you’ll must have some type of history to be approved for such a large loan.
It's vital that you look at your credit rating before you apply for a loan and, where possible, do something to develop a favorable credit record before making a mortgage application.
4) Not being on the electoral roll
The electoral roll allows lenders to verify your identity quickly. Not being registered will make it difficult for a lender to verify what you are.
This could slow down the mortgage application, as your lender will probably request additional identification checks, and it may even lead to your application denial altogether.
The great news? Making the electoral roll couldn't be simpler; all you need to do is complete an application while using register to vote service on Gov.uk.
5) Buying a ‘non-standard’ property
The kind of property you're looking to purchase may affect the success of your mortgage application.
Ex-local authority housing, for example, can be appealing as these types of home in many cases are cheaper than others around the open market. Most lenders, however, are reluctant to grant mortgages about this kind of property because they are considered more prone to lose value over time.
Similarly, it may seem nearly impossible to find a home loan for a flat above commercial premises like shops, pubs or restaurants, as they are at a greater risk to be affected by such things as noises, smells, rubbish and security issues, which can also bring down the value of the home.
For more details check out our story, 16 properties to prevent if you wish to get a mortgage.
6) Attempting to borrow too much money
It's vital that you perform the maths and become realistic about how much cash you can afford to gain access to.
Typically, mortgage brokers will only lend no more than four-and-a-half times the combined annual income of you and also other people you're buying with. Requesting financing above this threshold will likely lead to the application be rejected – and you may well discover that you’re offered less than the maximum.
7) Being self-employed
Mortgage providers could be unwilling to approve financing to self-employed workers.
This happens because, with no contract of employment or regular payslips, it can be hard to prove that you’ll have the ability to maintain mortgage repayments.
If you’re self-employed and therefore are hoping to purchase a home, it’s vital to compile documents proving your past income and future opportunities for payment. Most lenders may wish to see a minimum of two years’ worth of accounts.
8) Major lifestyle changes
Going through major lifestyle changes that may affect your finances, such as starting a family or going through a divorce, could negatively affect your mortgage chances.
Some lenders may partly base their decision on whether and how much to lend yourself on childcare fees, for example. Find out more in does having children ruin your mortgage chances?
Similarly, if you're expecting a young child on and on on maternity leave during the time of applying for a mortgage, lenders may be cautious about just how much you’ll have the ability to afford if you’re expecting a decrease in income. Read our guide on getting your mortgage during pregnancy for more information.
And if you’re hoping to get a home loan after you have divorced, it’s vital that you re-evaluate your financial circumstances, particularly if you’re buying alone. Our guide on selling real estate in a divorce shares everything you need to know about securing a new home.
9) Errors on your application
Lenders scrutinise every mortgage application having a close lens, so it's really important to ensure all of the information you give your lender is correct and up-to-date.
Any discrepancies or inaccuracies on your application couldn't only slow down the loan process, it could also lead to the loan being rejected altogether.
10) Signing up to the incorrect lender
So your finances have been in great order, your credit rating is impeccable; everything ought to be smooth sailing, right? Not necessarily.
Each lender may have its very own affordability criteria and may place excess fat on certain factors. For instance, although some lenders might be more prepared to accept applications from households with growing families or self-employed applicants, others might have more rigid criteria.
It's important to find the lender most likely to accept your financial and private circumstances the way they are – which is where the expertise of a large financial company can really help.
Speak to the experts
Whether you’re a first-time buyer or home mover, trying to get a home loan could be a stressful and daunting prospect.
Speaking to a large financial company can't only help you find the best mortgage deals, but additionally discover the the most suitable lenders for your personal and financial circumstances.
