Climbing up the home ownership ladder has always been a difficult goal, but the numbers actually show that four in five first-time buyers also struggle to get a mortgage.
The past year in particular has prompted many people to consider buying their own homes, as our living space has also become our workspace, but the challenges of time off and job losses have led to a downturn. the number of people who actually get a home purchase.
Credit scores, weak economies and job search challenges have led to a decline in the number of people able to secure a purchase after Covid, putting more pressure on already struggling buyers.
That’s according to Aldermore Bank, which found that on average, only one in five buyers now gets a mortgage on their first attempt, up from nearly three last year.
Worse yet, two-fifths of first-time buyers say they’ve been turned down for a mortgage more than once in the past year.
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The main reasons for unsuccessful applications are bad credit history, overdrafts, low deposit, credit card loans, lack of voter registration and being self-employed, reports the Mirror.
Gaps in employment, student loans, and payday loans also have an impact, but there are easy ways to improve your application without forgoing essential payments.
“Denying a mortgage, while it can be a deflating experience, is not a game over as options have widened over the past decade,” said Jon Cooper, loan distribution manager. mortgage with Aldermore.
“The growth of specialty lenders, who, through human underwriting, can dig deeper into the details of more complex applications, has opened the door for those who had complicated income streams or credit problems in the past to find a path to the property. “
James Andrews, financial expert at Money.co.uk, said buyers were caught off guard by unusual financial mistakes that most would not consider a risk.
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“When applying for a mortgage, one of the things you need to do is hand in a few months of bank statements,” James said.
“The idea is for your provider to verify that you can actually pay your mortgage when your expenses are factored in – but they’re not just looking at the total down, they’re also looking for red flags.
“The problem with some potential borrowers is that if you’re not careful, a perfectly innocent transaction could be misinterpreted by a lender and have you rejected.
“This means that it helps to know what they are looking for to make sure you don’t accidentally block yourself out of a deal you would otherwise qualify for.”
Here are eight unexpected reasons why your mortgage application might be turned down.
1. The jokes inside
Whether you’re receiving money to pay for a shared pizza, or for a larger amount of money like a vacation payment or rent, it might seem like fun to include a reference to a joke when sending. money.
However, lenders may wonder what these references mean – and most importantly, they may not take your word for it if you tell them it was a joke.
“Ask your friends to label all payments with a reference that reflects the actual purpose of the transfer, such as ‘pizza’ or ‘summer vacation’,” suggests James.
2. Send someone £ 100 for their birthday
If you are in the middle of a mortgage application, lending or even giving a small amount of money could raise questions from the lender.
This includes sending a friend or loved one a sudden sum of money or an unexpected purchase like a new refrigerator.
“Seeing less cash than normal in your account can impact affordability calculations, and if something doesn’t stick, it could delay the application process,” says James.
“The key is to make sure you have a good buffer in your bank account to account for any non-essential expenses during the mortgage application process.”
3. Betting or gambling transactions
If you enjoy a float every now and then it shouldn’t hurt, but frequent gambling for large sums can raise red flags for a lender.
In fact, Aldermore’s study shows that gambling transactions are the eighth most common credit problem when applying for a mortgage.
“If you bet small amounts here and there (like playing the lottery) it won’t impact your mortgage application.
“But lenders will factor in gambling transactions, assessing whether you are likely to comfortably pay your mortgage on time each month. So if your gambling is causing a problem with your finances, it can also cause a problem with your mortgage application, ”says James.
Gambling can lead to serious personal and financial problems. If you need help, you can contact GamCare for help and advice.
4. Get a new job – even if it pays more
Lenders don’t just take your income into account when evaluating your application – they also want proof that you won’t miss any payments, and a long-term job is strong proof of that.
“Getting a new, better paying job is something we generally celebrate, but it can cause problems when applying for a mortgage, as most lenders will only offer you one if you’ve been in your job for a long time. awhile, ”says James.
Some lenders believe it is riskier to grant a mortgage to someone who is still on probation.
“However, a higher salary can reduce the impact because it increases what lenders think you can afford to borrow. You will need to prove your new salary, so ask your employer to confirm it in writing.
5. Underestimate your salary
An error on your income – such as ignoring your annual salary increase – could mean that your application is rejected when the lender crosses your salary.
James says you should double-check any wording before submitting your form.
“Double check whether you need to enter your annual salary or your monthly salary, as this is a very common mistake,” he explains.
“You might end up telling your lender that you make £ 2,000 a year when you mean a month.
“Likewise, if you get regular bonuses or commissions, don’t include them in your base salary, enter them separately so your lender can see the full picture. “
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6. Drop-down menus
Some computers automatically save information from previous forms and cards, such as addresses and names.
But using stored data can also lead to errors – and wrong information being entered where it isn’t needed.
Accidentally saying you have two children instead of one child, for example, will affect your claim as banks will consider whether you earn enough to care for your dependents.
7. Do not have a paper trail for your deposit
If you received some or all of your deposit as a gift, make sure you have a paper trail that the money is coming out and entering the accounts so the lender can follow their path to your possession.
Not having it can cause delays in your application, and if you can’t prove where the money came from, it may not be able to be included in your application, ”says James.
“In the worst cases we’ve seen, people have had their accounts frozen and flagged as a risk of fraud after transferring all the money from family, partners and savings accounts on the same day and then again directly to pay the deposit. “
8. The follies of Friday evening
While it’s okay to want to socialize on the weekends, watch out for random nighttime or impulsive follies that might make you appear reckless or unreliable.
For example, suddenly withdrawing £ 100 from an ATM at 11pm for a cab or a drunken champagne splurge might make you seem a little unreliable – something banks can be extremely worried about.
Other ways to increase your chances of success
We’ve gone through a few more common reasons why your app might fail – and how to fix them.
- “I have no proof of credit on my credit file”
If you don’t have a history, you can actually apply for a low credit credit card to help boost your score. Remember to pay off your balance in full each month, otherwise it could make the situation worse.
Some of these cards will charge high interest charges because you are considered “at risk” – so use them sparingly.
- “Me / my partner is not on the electoral roll”
Register and register to vote. This is a double victory because you will also have a say in who runs your local constituency and your country.
- “I haven’t always lived in the UK”
It is true that some lenders may be worried about lending to people with limited permission to stay in the UK.
If you are eligible, it would be worth applying for UK permanent residence or ‘indefinite leave to stay’ to give him his official title. Alternatively, an expatriate mortgage can be considered.
- “I made too many credit requests”
Most credit applications will only stay on your file for six months – and most lenders will only look that far – so if you’ve done too much in a very short period of time, take a little time to let the dust settle. .