Refused a mortgage? Here’s why!

Applying for a mortgage can be a daunting process and being refused can make things quite stressful. However, it helps to understand why you may be refused, so that you then know what you need to do to ensure it doesn’t happen. Here are some reasons as to why you may be refused a mortgage…

Poor credit history

Likely to be the most common reason behind a mortgage refusal, your credit history plays a crucial role in whether you will be accepted or not. Before mortgage lenders agree to lend any money, they will review your credit history to determine whether they should approve the application or how much they should lend.

If you have struggled to repay debt in the past, come face to face with legal issues or bankruptcy, it will show up on your credit report. These are all elements that could contribute to your refusal.

Low income

There are many factors that lenders take into consideration, with affordability being one of them. To understand what you can actually afford, use a simple mortgage calculator. This will show you the total cost of the mortgage, including fees and interest rates. This will help you budget the kind of property you can afford and better your chances of being accepted for a mortgage.

Lack of credit history

Another reason why you may be refused is if you have none or very little credit history. You may see this as a good thing, but if the mortgage lender cannot see a history of your past repayments, spending habits, loans and more, they cannot determine whether you are a trustworthy candidate.

A way in which you can increase your credit score is to take out a credit card and spend very little on it on a regular basis while paying off the debt in full each month. This will prove your ability to handle credit and build your credit score.

Employment

As mentioned, affordability plays a crucial role in whether you are accepted and how much you can get. Employment gaps can affect your application as it shows you may not have a steady income. This may be seen as a red flag to lenders as it could seem like you will not be able to pay off what you owe. Some mortgage lenders prefer borrowers to have held down a job for some time as this will show they have stability.

Insufficient information on the application form

Leaving out information from your mortgage application form can result in a refusal. Some applicants believe that leaving out information will boost their chances of being accepted for a mortgage, but this is not the case. In fact, it will only boost your chances of being rejected. This is why it is important for you to be clear on your mortgage application. Here is the following documentation you must provide with your application:

  • Utility bills
  • Proof of benefits received
  • P60
  • Payslips from the last 3 months
  • ID
  • Bank statements of your current account
  • Statement of two to three years’ accounts from an accountant (if you are self-employed)
  • Tax return form SA302 (if multi-employed or self-employed)
  • If self-employed, you must provide information alongside your tax return to support your SA302.

These requirements may differ depending on the lender, so be sure to check. You may also need to provide outgoings, such as bills, loan repayments, credit cards, etc.

Refused a mortgage?

We advise you speak to a mortgage broker if you have been rejected for a mortgage. They will be able to tell you what you need to do to amend the situation and which lender will best benefit your personal circumstances.

Find the perfect home within your mortgage allowance

We understand that mortgage applications can leave you with a more limited budget than you may first expect, but this is where finding the right estate agents comes in. At Joules Estate Agents, we believe there is a home for everyone, and we know which area of the Heaton’s will benefit you the most. To learn more, get in touch.