Applying for a mortgage can be a straightforward task, but there are times when your application can be refused. In the majority of cases you can simply head towards another provider, but if you understand the potential reasons behind a refusal, you can save yourself time.
Here are five reasons why your proposal may be declined.
This is by far the most common reason why mortgages can be refused and if your credit history is less than perfect, you are going to find it more difficult to find a home loan. Even if you feel that your credit is immaculate, you can prevent any problems by signing up to a free and simple credit check. In rare cases, ID Fraud can affect your record or perhaps a financial institution claims that an agreement is unpaid when it has actually been settled. Checking and dealing with such issues can ensure that a mortgage application stands a better chance of being accepted. In addition, if you are aware of a genuinely poor credit history, remember to be honest with your intermediary as they may still be able to find a home loan within the market.
Payments not up to date
In some cases, your overall credit may be reasonable, but perhaps you have a loan, credit card or overdraft that has fallen behind by two monthly payments or more. Any potential lender will check your history for the last two years at least and such issues will suggest that you are overstretched. If this is the case, it’s better to wait until everything is up to date before you make that application.
No Credit History
It may be surprising for some to learn that having no credit history at all can count against them when it comes to applying for a mortgage. There are a proportion of buyers who look for their first home without ever having applied for credit in the past and have, therefore, never held a loan or credit card.
Unfortunately, this does mean that your prospective lender cannot assess your competence in paying off credit and with no previous history a refusal is a common decision. It may, therefore, be advisable to get a credit card with a low limit first and ensure that you pay it off in full whenever a statement arrives.
Lack of Employment
Even if you are in full time employment at the time of the application, a mortgage could be refused if there are gaps in your work history over the previous two years. Lenders will want to see regular disposal income and will be wary of any unemployed periods. This can be difficult to address, particularly if you are looking for work at the time, but you can choose to wait until a full, two-year period has been achieved before applying.
Make sure that every part of the application form is completed in full before you return it to your prospective lender or intermediary. An unanswered question may just be a simple oversight, but the loan provider may well see it as an attempt to hide a negative piece of information. Whatever the reason for the gaps may be, the likelihood is that your mortgage application will be met with an instant refusal.
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