We understand how disheartening it feels to be rejected for a mortgage, but don’t delete those RightMove email alerts just yet. There is a reason behind a lender’s decision not to grant you a loan and often those reasons can be addressed. Here are some common problems when it comes to your mortgage application, and what you can do to help.
I have a lower income
Lenders take your income into account when calculating the affordability of your loan repayments. Some look more favourably on lower salaries than others and a mortgage broker like Key Mortgage Advice will recommend which lenders are the best match for your income. If you’re still struggling, you could continue saving for a larger deposit so you wouldn’t need as large a mortgage, or you could look into buying with a friend, partner or family member. There is also the option of finding a relative to be a guarantor if their income could support your mortgage as well as their own. Alternatively, you could consider shared ownership schemes, where you only need to take out a mortgage on 25 per cent of the property’s value.
I don’t have a big deposit
You will usually need a deposit of at least 10 per cent but there’s no denying that saving can be tough. The Help to Buy scheme is useful for first time buyers who have a smaller deposit, so long as you are buying a new-build and can put down 5 per cent of the property’s value. There is also the new Help to Buy ISA to consider, where the government will give you £50 for every £200 you save, meaning you could receive up to £3,000 towards your deposit. Generally, it helps to put together a savings plan – work out exactly how much you need to put aside each month to reach your goal and consider any unnecessary expenditure you could cut from your outgoings. If you have a target, timescales and a plan in mind, saving can seem much more achievable.
I have a poor credit rating
Lots of people assume poor credit history means a mortgage is a write-off, but it isn’t always the case. There are mortgage products available which are aimed at those with bad credit, known as adverse credit mortgages, and again a broker like Key Mortgage Advice can help you with this. However, adverse credit mortgages usually cost more so it might be better to wait and improve your credit rating. You can do this by paying debts on time, closing any inactive accounts, making sure your credit cards aren’t at their limit and staying out of your overdraft. Check your credit report for errors and correct any you find, and ensure you aren’t financially linked to any ex-partners whose credit score might negatively impact yours. Get yourself on the electoral register if you haven’t already, you’d be surprised how much it impacts your credit score.
I’m self employed
Securing a mortgage when you’re self-employed can be more difficult but is by no means in possible. Make sure your tax returns from the past two to three years are up-to-date and your most recent accounts aren’t older than 10 months. It’s a good idea to use a chartered or certified accountant for these. You should also do a self-assessment using a SA302 form, which you can get from an accountant or the HMRC. Some lenders do ask for a larger deposit if you’re self-employed, but this varies from lender to lender and Key Mortgage Advice can advise. Our blog on self-employed mortgages has more information.
If you would like to discuss this topic in more detail or discover how Key Mortgage Advice can assist with your mortgage application, please contact us on 01772 620 000 or email [email protected]
Our blog on how to make yourself more attractive to mortgage lenders may help, too.