What Stops You Getting a Mortgage?

A common question that gets asked by first-time buyers is “what stops you getting a mortgage?”. The answer is many reasons. However, if your mortgage application gets rejected, there are plenty of things you can do to increase your chances of getting accepted when you apply next time. It is crucial that you don’t rush off to another mortgage lender when you get rejected as each application that you make could show up on your credit report. This short piece of writing will help you understand why your application might have been refused and give you the information you need to better your chances next time.

The Most Common Reasons Why Your Mortgage Application Will Get Rejected

A Poor Credit History

Mortgage lenders will always review credit history in detail when looking at whether or not, or how much, to lend to prospective borrowers, and the single biggest reason for these lenders to not accept applications is down to poor credit history.

If you have had difficulties with repaying debts in the past, for example on a credit card, personal loan, or even your energy bills, this will show as an adverse on your credit report, and you may actually find that a mortgage lender rejects your application on this basis alone. This is because the mortgage lender will consider you more likely to miss a mortgage repayment or be unable to repay on time. In other words, you are seen as a significant risk. However, getting a mortgage with a poor credit history isn’t impossible so here are some things you can do to improve your chances of because accepted in future applications.

  • Understand the mortgage application process before you begin; if you’re a first-time buyer, this can be a little bit confusing.
  • Work on being an attractive borrower to prospective mortgage lenders by being consistent; for example, paying bills on time will build a positive credit history.
  • When applying for a mortgage, talk with the potential lender what steps you took to correct any situation where you did miss a repayment.
  • Keep a constant eye on your credit score by obtaining copies from the different credit agencies and monitor your records for any abnormalities.

Providing False Information

Intentionally providing false information on documents or within the mortgage application details will more often than not result in an immediate decline from the prospective mortgage lender. Whether it’s at the commencement of the transaction, or days before closing the mortgage deal, the lender has the right to withdraw their approval if any misrepresentation or false information is discovered at any stage of the mortgage process.

It’s not difficult to secure a mortgage deal if your financial profile matches the guidelines that must be met in order for a mortgage lender to deem you eligible for a mortgage approval. Property, income, credit, and the mortgage amount compared to the property’s value, are just a few of the most essential details considered when reviewing a potential mortgage application. Increase the chances of an approval by being a low-risk borrower with a robust financial profile. Working with a specialised mortgage broker who has access to multiple mortgage lender options also increases the probability of a positive response.

Mortgage Lenders Making a Mistake

Mortgage lenders are not perfect and can make mistakes just like everyone else. Many of them just put the various details from your application run it through a computer, so it is possible that you failed because of a mistake or error.  A mortgage lender is unlikely to give you a distinct reason why you have failed with a mortgage application other than it relates to your credit file. If this occurs then the mortgage lender should provide you with the details of the credit reference agency that they used.

A Lack of Credit History

Some people choose only to use cash when they buy things as they don’t want to risk spending too much money on a card and getting themselves into debt, while other people have just never needed to enter a credit agreement, for things like a mobile phone or Netflix subscription.

The major downside to this is that there is that there will be no credit history. Any lender you want to borrow a substantial amount of money from ideally wants to see if you can effectively manage credit and are in a position to pay it back.

To increase your credit score profile, one option is to take out a credit card. This is a helpful way to improve your credit rating so long as you use it – and use it correctly. This means paying off the full balance every month and on time which means you will be able to prove your ability to handle credit and thereby increase your credit score. However, there are other ways that you can improve your credit score.

  • Build up a substantial credit history by borrowing responsibly and then pay back what you owe every month to avoid building up long term credit card debt wherever you possibly can.
  • Speak to your chosen mortgage lender before starting an application as you may have a better credit rating than you realise and could obtain a mortgage promise before starting a full application.
  • Apply for a copy of your credit file and check for any abnormalities or any outstanding payments that you are able to pay.