Below are 10 simple ways to help you avoid being refused a mortgage:
1) Check your credit report, probably the most obvious reasons for being declined credit. Before applying by for a mortgage you should check your file. Most high Street lenders will only deal with you if you have a perfect credit report. If your report isn’t great the best bet would be to speak to a mortgage broker. You can check your report free with noodle.co.uk or clearscore.com
2) Check affordability. Most lenders will not lend more than 4 and a half times your income and will want to do a full affordability assessment. Before applying to a lender make sure you use their online affordability calculator to see if they will offer the amount you need, the maximum a lender will offer differs greatly from one lender to another. If you are struggling to get the amount you need a mortgage broker may be able to help find a more suitable lender.
3) Check employment criteria, a lender will typically want a minimum of 1-year employment history or at least 2 years self-employed income. If you have recently become self-employed or returned to employment if may be difficult to find a lender to accept your income.
4) Debt consolidation can also be a factor, many lenders have restrictions on both the amount you can consolidate and the maximum loan available. Existing debt can also have a big impact on mortgage affordability. It maybe worthwhile discussing options with a mortgage broker before proceeding.
5) Check you fit the loan to value. Lenders restrict the maximum loan to property value for different products before applying make sure you fall into the right bracket. Some lenders will only lend up to 85%, while some still go as high at 95%.
6) Be realistic about your property value. It is important you are accurate with your property value, getting this wrong can cause big problems in the later stages of your application causing declines or higher interest rates. Do some property research online before you apply, look at rightmove.co.uk for local sold prices.
7) Age restrictions, lenders will generally want you to be over 21 and expect the term to finish before you retire.
8) Source of deposit. For a purchase the lender will want to see where the deposit is coming from, they will expect to see funds available on bank statements. If being gifted they will need proof.
9) Ensure good bank account conduct, particularly in the most recent 3 months prior to your application. Most lenders will want to see bank statement to see your income and check affordability, having returned Direct debits, exceeding overdrafts and bank charges will raise alarm bells with any potential lender.
10) Avoid lots of credit searches. Multiple mortgage/loan applications will lower your credit rating. Make sure you only apply to the best lender for your needs and circumstances and avoid the risks of a declined application.
At Plus Financial Solutions we recommend you always speak to a qualified whole of market mortgage adviser to assess your options to help you make the best choice.