So you’re buying a house. You’ve found your dream property. It’s in the right location, it’s the right type of house and it’s within your budget… happy days. But.
Despite your bank being very confident you would be approved for a mortgage, you’ve been declined. Despite keeping your credit record squeaky clean for years and years, some pen pusher has said ‘no’. Despite working hard to save for a deposit and spending months looking for the right property, your dream home is slipping out of your hands.
Sometimes life doesn’t seem fair, but you don’t have to take this lying down. Here’s a list of some of the most common reasons a mortgage is turned down, and what you can do about it:
There’s a problem with your credit file
If you have a poor credit history, it’s a good idea to improve your credit rating before you even start to apply for mortgages. However, sometimes you can have a perfect credit record, but a simple mistake on your file could make you look like a risky borrower. Contact the credit reference agencies (Equifax, CallCredit and Experian) and get a copy of your file to make sure everything is as you expected.
2. You’re not on the electoral roll
Lenders like to confirm that you are who you say you are, and that you live where you say you live. For this, most will check your application details against the electoral roll. This is an easy one to overlook, and if you find you are not on the register, it’s an easy one to resolve too. Simply contact your local council to be added or do it yourself at www.aboutmyvote.co.uk
3. You have debt, unsecured loans or payday loans
Borrowing is not seen as a bad thing per se. But borrowing over your means is. If you’ve taken loans, overdrafts or other credit, make sure you’ve paid back as much as you can before searching for a mortgage. Payday loans are the worst, as these are seen as emergency credit that is taken out by people who can’t cope. Any payday loan since 2011 will show up on your file, even if you paid it off on time, so avoid taking these at all costs.
4. Your deposit is too small
You can get a mortgage with as little as 5% deposit but many lenders are currently asking for more. This is especially true if you don’t score highly in other areas of a lender’s criteria, they may still be prepared to lend but will want a larger deposit. Try to boost your savings as much as possible before entering into the application process. The larger your deposit, the greater your chance of being accepted and the more preferential the rate you’re offered will be.
5. You’re retiring during the mortgage term
New mortgage affordability criteria which came in during 2014 have seen many more people being turned down for mortgages despite having good salaries and clean credit records. If you or your partner are due to retire during the mortgage term, your lender may look unfavourably on your application. With housing so expensive, some borrowers are seeking out 30 year mortgages, which could see you being turned down as young as 40 years old. If this is the case, see if you can increase your monthly payment budget and reduce the mortgage term so you are not retiring during the loan period.
6. Application errors
Nobody is perfect, not even your lender, and mistakes can sometimes happen that were simply a human error. At some point, the information from your application form was entered into a computer database, and a simple typo in this situation could see you turned down. If the refusal is really unexpected, schedule an interview with the lender to discuss your application.
7. You just don’t fit their criteria
Some lenders have a specific demographic that they like to lend to, and if you don’t fit the bill, then you could be turned down. If you think this has happened, try approaching an independent mortgage advisor for help, as they will have a better idea of which lenders are likely to accept your application.
Whatever the reason you’ve been turned down, don’t let it dishearten you. There are things you can do to make your application more attractive to another lender. Get in touch if you’re in this situation and want some impartial advice. I’m always happy to chat through your options so call me on 01252 759 233 or email richard@thesurreymortgagebroker.co.uk
