What Stops You Getting A Mortgage

What Stops You Getting A Mortgage

10 Mar 2021

Introduction: - Banks may turn down your mortgage application after the pre-approval phase if you suffer from credit issues, have insufficient income or for reasons like you are in the process of changing your job. Here in the discussions, we will try to understand the factors that can help you know what may Stop You from Getting a Mortgage and how you can improve your chance of getting a loan approved.

10 points to consider for getting a Mortgage

1. Credit Record: -

A credit history that shows you've struggled to pay back the debts can halt your application. You need to fix the credit data by paying back some debts and building up your credit history, which can help the lender determine your ability to pay back the mortgage on time. An inadequate credit report is one of the prime Reasons Why Mortgage Applications Get Rejected. 

The lenders will turn you away once they believe you are facing credit issues and have been irresponsible in paying back in the past or are spending at too much risk in terms of your credit status. Such issues can impair your profile, and it may become difficult to secure a mortgage. 

2. Your Remuneration: -

Some lenders straightway reject applications from self-employed individuals. However, the mainstream lenders may ask those working on temporary jobs or on a contract to submit two to three years of accounts reports to back up their application. For this reason, many newly self-employed applicants struggle to get the desired approval, but there may be other types of backup options if this applies to you.

3. No Credit History: -

A first-time homebuyer mostly does not have sufficient credit history of satisfying the lender's requirements. There can be minor financial 'blips' that one can overlook after a year, but major financial mishaps will always remain on your credit report for about six years. Therefore, applying for a mortgage after having a well-structured credit background is recommended.

4. Excessive Dues: -

We all know that a credit score determines if you'll qualify for a mortgage or not. However, if you're applying for a mortgage and have too much debt in the background, it can stop you from landing yourself a mortgage deal. 

To know Can You Get a Mortgage with Outstanding Debt, lenders will conduct affordability checks that consider your income and expenses and the loan/credit card repayment statements. However, they check not just the debts you have but also the debt you could have. 

5. Not Voting Properly: -

It may be Hard Is to Get a Mortgage UK if you are not registered to vote at the address that the lender wants to confirm your details, but if you aren't, you could sign up online through the Electoral Commission's website or through the local council to get it. 

6. Errors in Application: -

Just like errors in your credit report, errors in your application can impact your chances of getting a mortgage. Lenders are particular about the details mentioned in the applications, as they want to ensure everything in the form is accurate. 

If a lender discovers something later which was not disclosed beforehand, they may question it and are more likely to search in-depth in your application. So, make sure that you do not put any inaccurate information and do not try to hide any crucial information when applying for your mortgage. 

7. Your Work History: -

Your mortgage loan lender wants to know that you have a steady stream of income and a consistent employment history. Generally, a lender wants to ensure at least two years of continuous employment. If you've changed several jobs over the past couple of years or if there are significant gaps in employment, it could work against you.

8. New Loan after Applying for Mortgage: -

One of the commonest reasons you could be denied a mortgage after being approved is applying for a mortgage once you have been approved. When you get a mortgage, the lender will typically check your credit report and score at least twice when you initially apply for the loan and shortly before closing. 

Any significant discrepancies between the two can lead to objections. You can get a mortgage with a loan, but you need to show you are not making large expenses or have multiple alternative sources of income.

9. Wrestling with Finances:-

A history of payday loan usage can alarm lenders as many of them will see it as an indication of possible financial mismanagement.  

10. The Erroneous Money Lender: -

Every lender has criteria to lend to a particular type of customer, and not every customer will fit that mould. As a result, some lenders may refuse a specific type of application. For example – they may reject all applications where the job status is "self–employed" or those where age is over 75 without considering other factors. 

Reasons Why Mortgage Applications Get Rejected

Mortgage applications sometimes get rejected in the later stages. Some reasons why mortgage applications get rejected are given below-

1. Age Matters: -

It may be not easy to get a mortgage post-retirement. If you're a pensioner, you'll likely find that your options are limited, and without specialist advice, finding the right lender can be tough. However, under certain circumstances, lenders may approve anyone over 75 or 85, though it solely depends on their criteria to approve an application.

2. Insufficient Documents: -

Applicants should take time to fill in the forms carefully and submit all the needed documents for the process to avoid rejection due to inconsistencies in the application form in later stages. 

3. Low Credit Score: -

A low credit score may show that you're a high-risk investor who may have trouble making payments or handling additional financial responsibilities. 

4. Huge Debts: -

The lenders can use the debt to income ratio to determine whether you'll be able to take on more debt. So if you have a lot of debt, you should work on paying it down before applying for a mortgage

5. Credit Report Mistakes: -

Despite having a good credit score, someone may have errors in the reports. The credit bureaus and the creditors that play a part in developing your credit report may commit certain mistakes, which can lower your credit score and be a big headache to fix. In addition, it can lead to the rejection of a mortgage application. So, one should correct all the entries before applying. 

6. Changing Job Repeatedly: -

Lenders like to see financially stable people responsible for their financial liabilities. You can make monthly payments when you're getting a steady paycheck. If you lost a job recently, a lender might ask whether you can afford a mortgage right now.

And a new job can come with many uncertainties, though switching a job in the same field with equal or greater pay won't be an issue. 

7. Certificate of No Dues: -

After repaying the entire loan amount, one needs to get a certificate to prove no dues. 

8. Delay In Previous Loan Repayment: -

If someone fails to repay the current amount on time, it can create a problem to get a mortgage. So make sure you don't withdraw funds, miss a payment or apply for loans during the mortgage process, as it could cause a drop in the credit rating.

Instead, you can try to work out an arrangement with creditors to pay what you can, and it could show up on your credit report as "paid as agreed." 

9. Property-Related Problems: -

You could be denied the mortgage loan when you have a home inspection where the property has certain major structural issues. In addition, lenders typically deny your loan if they see the home as a bad investment during the appraisal process. 

For example - Most properties that aren't made from bricks and mortar in the UK fall into the 'non-standard construction' category, and such properties find it difficult to get a lender. However, some mortgage providers specialise in those properties that offer loans for the non-standard construction sector.

How Hard Is It to Get A Mortgage UK?

Most mortgage lenders make strict checks in the current climate to stop customers from getting the deal they want. They check all the personal details like credit score, ratings, and income to dues ratios to measure the ability to pay back the loan. 

In addition, they review all the conventional household bills and loan debts to ensure the mortgage repayments. One of the main issues that stop self-employed people from getting a mortgage is proof of income, namely not having enough of it. 

So most mainstream mortgage lenders will likely ask you to submit two to three years' accounts details to back up your application. For the same reason, newly employed people struggle to get it. 

Also, you may find it difficult to get a mortgage UK when the house you select is not considered equally valuable by the lenders or if it comes under the 'non-standard construction' category. 

There are other conditions like where you may find it difficult to get a mortgage UK if you do not vote. 

How to Get A Mortgage on A Low Income?

For many prospective homebuyers, saving up enough mortgage deposit is the biggest hurdle as most lenders will only approve an application if at least a 10% deposit backs it up. Unfortunately, you'll likely need even more than that to get the best interest rates.

There are some ways to get a mortgage on a low income are:-

  • Contact an agent who is an expert on the mortgage on a low-income scheme.

  • You must look for the best provider and rates you can afford.

  • Compare all the available options.

  • A huge deposit could save expenses on interest rates.

  • With a larger deposit, one can apply for a smaller mortgage that the lenders do not consider risky.

How to Get Approved for A Mortgage?

The two main points for getting approved for a mortgage are –

1. Acceptable Credit Score: - To get approval for a mortgage or home loan, you should have a good credit score. 

2. Verification of Job and Income: - A lender often asks for employment verification if they doubt the applicant's ability to earn and payback. If someone can provide all documents to establish their credibility, they can easily get approved for a mortgage.

Can You Get A Mortgage with Outstanding Debt?

If someone wants to get a mortgage with outstanding debt, you must provide the details of all your debts. Specifically, any monthly obligations, like the car loan or student loan repayments, where the minimum payments on your credit cards are also considered. 

It is added to your regular mortgage payment, and the sum is divided by your income to calculate your back-end ratio, a.k.a. your debt-to-income ratio. To get a mortgage with a loan, lenders like to get the DTI at a ratio equal to or less than 36 per cent, but it's possible to get approved even for much higher, like over 55 per cent, if you have alternative ways to pay back.

They will consider other factors like if you do not have a credit history, you can use secured credit cards where the funds in your accounts can be used to pay back, which will help build a credit history. 

You can join a parent or a family member who can help you get the benefits of their credit rating, or you can get credit-builder loans where the loans are funded by your savings and are repaid in instalments. 

Conclusion: - 

Perhaps if you want to borrow too much or too little, even if you can afford it, the mortgage loan process adopted by some lenders won't approve your application. Maybe you're self-employed, too young, or too old – there can be other multiple criteria to judge your application, and it won't always be a perfect match. 

For a lender, no credit is as bad credit. If you've no credit history, they will not have any assurance to trust your ability to pay back. Your credit history establishes your reliability as a borrower, and without it, the lenders won't know how responsible you are for repaying on time. 

Rather than risk being turned down, one should seek advice from an expert who will assess your circumstances and match them to the best possible lender.

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