Securing a mortgage on a prospective home can be a daunting prospect. Before you dive in to a mortgage application, get ahead of the game by understanding the most common reasons mortgage applications are rejected. Remember, each lender has its own lender criteria, which may place more weight on one factor than another. What one lender might perceive as risk, another might perceive as non-risk. If you’ve had a mortgage application rejected, then there are some considerations to make before you reapply.
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Timing in employment
Lenders want to be sure that money borrowed can be paid back. Lenders will feel comfortable that you can continually pay back what is borrowed if you, and partners you are borrowing with, have a record of long employment. If you’ve only been in a job a few months, perhaps waiting a little longer before submitting your mortgage application will help.
Trying to borrow too much
If borrowing a large amount of money, lenders need convincing that you have the ability to pay it back. Circumstances in life change. If you’re trying to borrow a large amount you need strong evidence that there’s a track record of paying back what has been borrowed. Perhaps a better tactic is to save a little more cash, increase the deposit amount and reduce the dependency on borrowing.
Not registered on the electoral register
A simple one to fix. You must be registered to vote so that your mortgage lender can confirm who you are and where you live. aboutmyvote.co.uk
Small deposit, or from a gift
Lenders want to have confidence in your ability to manage your finances. And if your ambition is to purchase a house, they want to see that you have managed to save for a deposit. This shows financial planning and prudence. If the deposit is too small, or the deposit is entirely gifted from a relative, it may weaken the application. Save small, regular amounts to show that you can manage yourself.
Lending rejected too many times, or dependency on payday loans
If you’ve applied for a mortgage before but it was rejected, it will show up on your credit file. You’ll probably need to work on improving your credit score, improving your financial situation, saving and making alterations to the amount you are looking to borrow. Or if you’ve been rejected for numerous other loans that too will show on your credit history. And reliance on payday loans will potentially show a lack of financial planning too. Try to avoid these and build your credit rating back up before your next application.
Applying with the wrong lender
This is a huge factor. Due to the nature of each lenders’ lending index, it might simply be that your application doesn’t match up well with that lenders criteria. Lenders do tend to have specific demographics that they like to lend to and if you don’t fit in to that, your application might be rejected. The best way to ensure your application is in front of the right lender is to use an independent mortgage adviser to source the best lender for you.