When you’ve gone to all the trouble to save up a deposit, search for your dream property, learned how much house you can afford, and start getting your hopes up for a home, there’s no worse feeling than being told you can’t get a mortgage. It’s not a rare occurrence and can happen to anyone but instead of having to put your dreams on hold, just prepare yourself for success in the first place and save the heartbreak.
Check your credit rating
If you have a poor credit rating, this could affect your ability to secure a mortgage because lenders might consider it too high a risk for them. Ideally, you need to have a reliable track record of meeting payments on time to show that you will be able to make your mortgage payments each month. To improve your credit score, try to get rid of existing debt or credit cards that you don’t use. Don’t apply for more credit until you’ve secured your mortgage. To be considered a responsible individual with a good credit rating you also need to get yourself on the electoral register, it helps lenders check to see that you are who you’ve said you are.
Hold your horses
You need to stay consistent while you’re applying for a mortgage; decisions like changing jobs or moving money around for better investment opportunities aren’t sensible. Put yourself in the lender’s position for a moment and think whether you’d want to lend to someone who is risking having no job for a brief interval while they search for something else.
Equally, if you’re busy moving money around to find the best interest rates it makes things complicated that don’t need any more complicity adding to them. If you’re still tempted, The Realtor offers some great advice on why not to move it around. “Maybe you’d like to make some extra cash off those reserves – besides, the money is just sitting there anyway, right? Wrong. It’s serving a real purpose: showing your liquidity. Moving money around can wreak havoc on your loan approval.” Just behave until you’ve got the house, ok?
Slow down on the shopping
Hey, big spender – you might want to watch out over the next few months, a large shopping spree on the credit could get your mortgage request declined. This might sound a bit dramatic but you’re about to take out one of the most important loans of your life. Usually it’s a serious amount of money that you’ll be in debt to the bank with, so why are you out there spending money you don’t have? It’s not just one credit check the bank will carry out; they will be keeping tabs on you right up to the point of finalisation.
Keep good records
Another common reason that mortgages get refused is because you haven’t been a UK citizen for long enough. The accepted time is usually over three years to be eligible for a mortgage or loan. That said, the reason behind this is because you won’t have substantial records of your credit history so even if you’ve had the best two years of your life, you’ve got to convince the lender that you’re a legitimate professional who can make the repayments. You can get round this by keeping excellent records with accountants from the previous countries that you lived in. Alternatively, you can apply for a mortgage from a lender based in your home country.
The self-employed struggle
In the past, mortgages have been particularly difficult to apply for if you’re self-employed. The norm is that you have an accountant who has kept pristine accounts for a whole two years of your time in self-employment so that when you talk to mortgage brokers, you have evidence that it’s all going swimmingly.
But, according to The Telegraph, things aren’t going to stay so tricky and in 2016, 120,000 new loans were granted to the self-employed. Smaller building societies are recognising that the nature of employment has changed dramatically over the past few years so are offering applicants without a guaranteed monthly pay cheque competitive mortgage rates.