Every mortgage lender will have a different way that they underwrite your mortgage application. Many customers immediately get turned down because they are talking to the wrong lender and their situation was never going to match the banks criteria. Here we will show you a few of the main reasons that customers are given when the bank says no.
- You have previously had bad credit
Things like missed payments on credit agreements, defaults on loans and credit cards, county court judgements (CCJ’s), are all items that are going to show on your credit report. Lenders are going to see this and if their lending criteria doesn’t allow for it, you are going to be declined.
The good news here is there are lenders that will offer mortgages when you have previously had problems. A good mortgage broker will have access to these lenders and will quickly tell you your chances of being accepted.
- You have limited credit history
Banks and other lending organisations like to see that you have a good history of borrowing money. They like borrowers who have borrowed before and paid back every month without fail. If you have managed to get this far in life with limited borrowing, you may find reluctance from some mortgage lenders to be the first one to lend you money.
Using a credit card, and paying it off each month in full, is one way to build up some history for another bank to see.
- Lots of credit searches on your credit file
Too many credit searches in a short period of time will some times go against you. Lenders will think you are credit hungry and looking like you are building debt which they do not like.
A credit search is unavoidable when you are looking for a mortgage. Every lender is going to want to take a look at your credit file to form an opinion on whether you are the sort of risk that they want to take on. By using a good mortgage broker, you can limit the chances of unnecessary searches because they are only going to go to those banks where you stand a good chance of getting a positive response.
If you find you are being turned down, stop making applications until you have taken some professional advice.
- Are you on the electoral roll?
The stability of living in the same property for a number of years is a positive tick when it comes to lending money. A mortgage lender will use the electoral roll to prove where you have been living as part of the application process.
If you are not already registered it is advisable to do so before you start looking for a decision.
- They don’t think you can afford it
One of the first things you can expect when you are speaking to a Mortgage Broker is that they are going to do an affordability check on you. This is done to make sure the amount you are looking to borrow is achievable within the individual lenders own calculations.
Every lender has a different way of working affordability out, and a good mortgage broker will know which ones are going to give you the best deal for your own situation.
Thinking about what you are currently spending your money on will give you an idea of what is left towards your new mortgage. Look at utility bills, clothing, eating out, current outstanding credit such as credit cards and loans. Even how many people are going to be living at the property and their contribution to the household income will be taken in to account.
- Your income isn’t acceptable to them
If you have only been in your new job for a few months, and still in a probation period, then you may find you have to wait a while longer before making your new application.
Also, the self employed can also find they are unable to get accepted until the business has been running a number of years, and the company accounts can support the affordability calculations mentioned above.
Speak to a mortgage broker early in your planning process and allow them to work with you to make sure you have done everything you can to improve your chances of being accepted.
If you have previously been declined don’t let this put you off making applications in the future. It may be that you were just speaking to the wrong lender for your situation.