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Why Mortgages can be declined – what you need to know
Most of us will need to get a mortgage at some point in our lives. Once you’ve found that dream home you’ve been looking for, you’ll need to apply for a mortgage. This can be the biggest hurdle for many of those wanting to be homeowners. You want to get approved by a lender to secure that home you’ve been looking at.
There are various factors that contribute to your mortgage application. Many will be successful in securing one. However if you have been declined or are planning on applying for a mortgage and want to research beforehand this article outlines some of the reasons that may affect application being successful.
What Can Stop You Getting A Mortgage?
Being rejected is hard enough, and when it comes to having a mortgage application declined, it can be devastating. But what’s stopped you from securing one with the lender in question? Here are some of the top reasons that could have caused you to get declined.
1) You can’t afford the mortgage you’re applying for
The mortgage that you’re applying for might not be something you can afford. When assessing your application, the lender will look at how much you earn. This applies to your partner as well if you’re making a joint application. Your mortgage application could get rejected due to your annual income. This is on the grounds that your monthly repayments would exceed the income. Usually, the repayments get multiplied around four times to check against your income.
2) You aren’t on the electoral register
Not everyone wishes to be on a jury, but for a lender, the electoral register is important to get on. Making sure the lender has evidence of where you say you are currently living is essential. It can play a big role in whether you get accepted for a mortgage or not.
3) You have too much debt
We all tend to gain some form of debt during our lifetime and it’s important to pay it off as soon as possible. It’s also important that you don’t have too much build up of debt. By having too much debt, you could end up putting yourself at risk of getting declined for a mortgage. Some lenders won’t want to lend you more money if you don’t make repayments on time. They also won’t favour you too well if you have enough debt to pay off already.
4) You have discrepancies on your credit report
When doing your application for a mortgage, the application might be perfect. But, if you’ve missed something that you haven’t disclosed, it could complicate things. Anything such as a mobile phone contract or loan to pay off a laptop could stop your application. It’s important that you’re double checking everything that you have declared. Ensure there’s nothing missing to give your application the best success possible.
5) You have no credit history at all
You could hinder your chances of getting a mortgage if you don’t have any credit history whatsoever. Making your mortgage the first time you’re borrowing money is not advisable. Not everyone enjoys borrowing money. But for the sake of appealing to the lenders, you might want to start doing it now. It could be spending a bit of money here and there on the credit card.
6) You’ve moved around too much
When it comes to borrowing money, lenders like stability. That’s the case for your employment so that a regular income is coming in and your property. If you’ve chopped and changed around too much of your job or home, then that could make you appear risky. This can be especially the case if you’ve moved around in a short period of time. It’s important to show consistency as much as possible in your application to lenders.
7) You’ve made too many credit applications in a short period
Applying for credit too much and in a short period of time can also complicate things. Borrowing too much money at once might make you seem like a risk to lenders. Try to keep your borrowing more sporadic instead of being all within the space of a month or so.
Can a mortgage get declined after an offer?
A mortgage offer can get declined after it’s offered. Lenders can do so until the point of completion. That means nothing is truly final until you’ve got the completion, and you’re collecting the keys. Lenders will tend to decline the offer if you no longer meet the lending criteria. It can also be the case if there’s been an error in your application. This could be adverse credit history that isn’t declared or the wrong income information.
Can I improve my chances of acceptance?
To improve your chances of acceptance, look at the above that’s mentioned. Try to reduce your spending and have a limited amount of debt. You should be on the electoral register and have a good credit score if possible.
The better your credit score, the more availability of lenders you’ll have to choose from. This gives you the opportunity to avoid paying high interest rates and get the most appropriate deal. You can look at your credit score regularly to help ensure everything is up to date and correct.
How can using a Mortgage Broker help if I’m declined a mortgage?
A mortgage broker is an individual that has access to multiple lenders across the market. This gives you a lot of scope and saves you having to do all the research yourself. You may have tried a few banks and companies already, but a mortgage broker can look at thousands all at once. They also can advise which lenders are more sympathetic to applicants with an adverse credit history.
This means that even though you might have been declined for a mortgage, there’s still lots of options out there. With that said, it’s worth paying for the services of a mortgage broker. It could end up saving you money and ensuring you have a good mortgage provider at the end of it.
Try not to worry if you’re declined for a mortgage, as there’s likely to be plenty of options out there. Take it as a sign that this wasn’t the right mortgage lender for you.
A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Other types of mortgages are available such as Variable, Cashback, Capped, Collared & LIBOR.