Potential Issues that Can Scupper a Mortgage Application
For many people, getting a mortgage is an important step towards home ownership. However, lenders will scrutinise applications carefully, and there are several issues that could potentially ruin your chances of being accepted. Being aware of these pitfalls can help you avoid them when applying.
Poor Credit History
One of the biggest obstacles is having a poor credit history. Lenders will check your credit file and look for any late repayments, missed payments, defaults, CCJs or bankruptcy. Even one or two minor blips could ring alarm bells, as it suggests you may struggle with mortgage repayments.
Before applying, check your own credit file so you know what the lender will see. If there are any problems, take steps to improve your rating, like registering on the electoral roll, paying off debts and not taking on new credit.
Low Deposit
The size of your deposit is another key factor. Typically, lenders want a minimum 10-20% deposit. With less equity in the property, you’re seen as higher risk if house prices fall. Recent regulation changes also mean lenders are more cautious about high loan-to-value lending.
Saving a bigger deposit takes time but gives you a better chance of acceptance.
Irregular Income
Lenders prefer borrowers with a stable income from permanent employment or pensions. If you have an irregular income, from self-employment, bonuses, commission or part-time work, it raises uncertainty.
Provide several years of accounts to prove your earnings. Explain any fluctuations, and show your income is reliable. Having other assets or savings can also provide reassurance. High net worth individuals seeking large mortgage loans are more likely to be successful than someone applying for a mortgage on a part-time wage.
High Existing Debts
Carrying excessive debts can make affordability an issue. Lenders will look at your monthly outgoings including credit cards, loans, overdrafts and other commitments. A high percentage of your income going on debt repayments means you may struggle to meet mortgage payments. This applies even if you need a high net worth mortgage – if the repayments are more than a certain percentage of your income, you might have trouble finding a lender.
Reduce debts as much as possible before applying. Avoid taking on new liabilities that could impact affordability. Provide explanations for any unusual expenditures.
Poor Credit History of Partner
If applying jointly, the credit rating and debts of your partner will also be considered. Even if you have an impeccable record, problems with their history could still jeopardise your application.
Discuss your finances openly and check for any issues you’re unaware of. Consider applying in a sole name if one partner has a much better financial profile.
Work with a Mortgage Broker
Getting advice from a professional mortgage broker can be extremely helpful when applying for a mortgage. A broker has extensive knowledge of the market and can guide you through the process. They can assess your situation and identify suitable mortgage products, such as large mortgage loans for high net worth individuals. Brokers have access to deals you may not be able to find yourself. They can also advise on steps to improve your chances of being accepted. While some brokers charge fees, others provide their services for free.
Taking guidance from a broker gives you an expert on your side who can handle communications with lenders and maximise your odds of success.
By being aware of these potential pitfalls, you can take steps to avoid or mitigate them when applying for a mortgage. This will give you the best chance of a lender approving your application.
