Getting a mortgage is not as easy as applying for a short-term loan. There are several factors that lenders consider to sign off on a mortgage application. Just because you have a considerable size of the deposit, it does not mean that your lender will approve your mortgage application.
According to a survey conducted by Which? About 40% of homeowners aged between 18 and 24 suffer from having a mortgage approved compared to 4% of those aged over 60. When it comes to signing off on a mortgage application, lenders are stringent. Young people are facing more rejections because of smaller deposits and lower-income.
Further, it takes a longer time to build a credit score. So, does that mean you cannot get a mortgage quickly? Well, there are several factors responsible for mortgage rejection. Here is how you can increase your chances of approval.
It is not surprising that lenders will approve your application if they are confident that you can manage to make repayments on time. It is a big loan, and therefore, the lender will estimate your affordability bearing in mind the fact that you will likely face ups and downs in your financial condition down the line.
The lender will look over your income statement to ensure that you will be able to manage all your regular expenses along with mortgage repayments. If they are even slightly sceptical, they will turn down your application without further ado.
Suppose you have got your application cast aside due to affordability factor, reign in your spending by cutting back on unused subscriptions and gym memberships. If it does not improve, you should try to increase your income sources.
Bad credit score
A poor credit score is probably the most prevalent cause of having an application turned down. A mortgage is not a short-term loan that you can apply for very quickly when your credit report is not up to the par. Can I get a mortgage with bad credit is a much popular question that every borrower asks. It is because mortgage borrowers give up hope.
Do not let your poor credit rating dampen your spirit. There are some mortgage lenders offering deals despite a bad credit rating. However, you will have to arrange a deposit size as much as between 20 and 25%.
If you cannot arrange such a large deposit size, you will have to arrange a co-signer with a good credit history that can be your family or friends. However, if you have parents to co-sign your mortgage, the term of the loan will be up to the age at which your parents could take out a mortgage, thereby a shorter period.
Sometimes, bad credit history is the result of identity theft, incorrect contact details, erroneous payment default, and the like. Make sure that you have gone through your credit rating before putting in the application.
Recent job move
Employment stability is another essential factor that every lender takes into account to arrive at a decision. If you do not stick to a particular employer for a long time, you will likely have your mortgage application rejected.
If you have served a long-term service to your employer, the lender will believe in your job security. However, if you have recently moved from your current employer, make sure that it is not very recent at the time of applying for a mortgage, and if you have changed your job, lenders will require you to have worked there for at least six months. People on a probationary period are less likely to get approval for a mortgage.
This is rare but still a cause for rejection. Even if you are a perfect applicant, you will have your application cast aside in case the property valuation suggests that it is not worth the amount you want to pay for it.
If you have got your application rejected because of the valuation, you should contact online mortgage brokers. These brokers have a panel of reputed mortgage lenders. They would talk to lenders on your behalf to help you get a better deal.
Now that you have got to know the reasons for having your mortgage application turned down. So, next time when you apply for a mortgage, make sure that you have gone through your credit report and you have been working with your employer for at least more than six months.
It is always suggested that you contact an online mortgage broker. Since they have a panel of lenders, they can introduce you to the lender whose deal best suits your current financial circumstances.