What can stop you from getting a mortgage?
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What can stop you from getting a mortgage?
Carolyn Dunion explores the potential obstacles to securing a mortgage and offers tips on how to avoid them.
What can affect your chances of getting a mortgage?
Getting a mortgage can be tricky, and a few things can stand in your way – your income, age, credit commitments and credit history, for example. How much deposit you can put down is a big deal, too.
Why is it so hard to get a mortgage?
This is an interesting question, and I can understand why people ask this. But, in general, it’s good news. Mortgage lenders are lending, and there are lots of positive things in the mortgage industry.
I’d never suggest anyone automatically assume securing a mortgage will be difficult or impossible. However, there can be challenging circumstances. As I always say, this is precisely where advisers prove invaluable.
We can look at your circumstances and make an assessment around which lender might consider your own situation. For example, if you have somebody who’s had credit issues in the past, it’s not necessarily that they can’t get a mortgage, but it might mean that we have to go to a different lender.
How often do people get rejected for mortgages? Does this vary?
It does vary, absolutely, though we wouldn’t have a business if it were very, very commonplace.
When you approach us for a mortgage, the first step is a ‘fact find.’ This involves gathering essential information such as your income, credit history, and existing credit commitments. At this early stage, we can usually determine your eligibility. If we identify any potential roadblocks, it’s often not a complete rejection but a ‘not yet.’ In such cases, we’ll help you develop a plan to address those issues.
While mortgage applications can be rejected later in the process, this is uncommon. An adviser should be able to identify potential issues beforehand, determining whether an application is worthwhile.
Is it bad to be denied a mortgage?
Being denied a mortgage can understandably lead to significant disappointment, which is a natural reaction. However, a denial doesn’t necessarily indicate a lasting problem. There are numerous reasons why a mortgage application might be declined, often stemming from an individual’s personal circumstances.
Difficulties can also arise from the property itself. Lenders may reject properties with unusual construction types. While disappointing, this is not catastrophic, as finding a different property could lead to a successful application.
Can you be refused a mortgage after a Decision in Principle?
This is important. Yes, you absolutely can.
A Decision in Principle (DIP) is only ever valid on the day it’s done, and people quite often ask, how long does a Decision in Principle last? Depending on the lender, a DIP can usually last between three to six months. But the DIP is based on the information we provide to the lender, and the credit score on the day.
If we have a Decision in Principle that’s successful today, but, for example, the person tomorrow defaults on a credit commitment, goes bankrupt, or leaves the job that they’re in and doesn’t have an income, the Decision in Principle becomes worthless. Even with a valid DIP, a mortgage can still be refused if the property you intend to purchase does not meet the lender’s criteria.
Can your credit score be a reason for being declined a mortgage? Can you be declined even if your credit score is excellent?
The answer is yes, you can be. Credit score is a very important factor in whether you’ll be granted a mortgage, but so too is income, credit commitments, and financial dependence. A strong credit score is crucial for mortgage approval, though it’s not the only factor considered. A poor credit score can certainly hinder your application.
Can your age be a reason for not getting a mortgage?
The simple answer is yes. But it’s often not what people expect. Most lenders will allow a mortgage term to go to age 75 without too much question. Some lenders will consider a mortgage term that would take the applicant up to age 80.
In all of these scenarios, you need to work out how credible it is that you can keep paying a mortgage to that age. You might have to show evidence of pension contributions and things like that. If you’re beyond age 80, we’re probably not going to be able to help.
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Can it stop you from getting a mortgage if you do not have a deposit?
Yes. Typically, a minimum deposit of 5% is required by most lenders.
Schemes are occasionally introduced to assist with very low or even no deposit scenarios.
There are some circumstances where we can structure the finance so you effectively don’t have to have a deposit. It’s worth having a conversation with an adviser to see if you meet any of the criteria.
We’re very approachable and always happy to speak initially. We might see something in your circumstances that you haven’t considered. It’s worth having that conversation to explore the possibilities.
Can having high debt affect your chances of getting a mortgage?
Absolutely, yes – this can certainly be a factor. Lenders often consider what they refer to as ‘overall indebtedness.’
Lenders will consider how much debt you have, partly on an affordability basis. So, how much is it costing you to service that debt on a monthly basis? And whether adding a mortgage to that is going to be sustainable. If your debt exceeds your income levels in terms of how much you have outstanding, that tends to be an issue.
It’s not always a factor, but it’s certainly worth bearing in mind. Other things that can sometimes be a factor are credit cards. Credit cards are meant to be revolving credit, so that your balance should go up and down regularly. If you’ve got a credit card that’s sat at a high balance consistently over time, and you’re really just servicing the minimum payment, that doesn’t tend to reflect terribly well.
It’s worth having a conversation to see if your circumstances are going to be a factor. And again, just putting a plan in place of how best to structure that to increase your chances of getting a mortgage.
Can your employment history be a factor in not being able to get a mortgage?
Lenders primarily focus on your current employment structure and its sustainability. They are interested in details such as whether you have a permanent or short-term contract, or if you are self-employed. Their main concern is your future ability to maintain this employment.
There can be circumstances where lenders might raise an eyebrow, such as a recent change in profession to a new field without an established employment contract. This can be a more challenging scenario to explain, as you haven’t yet demonstrated your capabilities in that area. However, if you are in stable, sustainable employment at the time of application, your past professional history generally won’t be an issue.
Will it stop you from getting a mortgage if you have a low employment income?
The amount you can borrow is directly related to your employment income, with higher incomes generally allowing for greater borrowing. However, not everyone requires extensive borrowing, and the specific amount depends on how your income contributes to overall affordability.
Again, it’s worth getting an adviser to fully assess your personal level of affordability. But having a low income is not necessarily going to prevent you from becoming a homeowner.
Can you provide any tips on being able to get a mortgage?
Make sure you’re aware of your credit score and that you’ve checked it to make sure there’s nothing that’s inaccurate about it.
Make sure you’re on the electoral roll at your current property.
Ensure all your documents consistently display your current address. Especially if you’ve moved around a lot, or you’ve changed your name. Young people, for example, often have bank statements sent to a parent’s address while living at a university address. Maintaining consistent address information across all documentation significantly helps the mortgage application process.
Those are the main key points, but also start the relationship with your adviser as early as you can.
How can a mortgage broker help? Have you got anything else to add?
We genuinely are very approachable, and we love it when we secure mortgages for clients. This is what makes our job so wonderful. There are countless examples of people who’ve come to us, had some difficulty, and we’ve managed to get them to where they need to be. It might have taken us time, but there’s usually a solution.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Useful Links
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