Published On: Thu, Aug 4th, 2016

Can’t Get A Mortgage? Find Out Why

Can't Get A Mortgage? Find Out Why

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Buying a home is a huge commitment both personally and financially. You have to make time within your busy schedule to start the search, which can often be time-consuming. It could take months to find your dream home, as well as be taking up a lot of your free time going to viewings and talking to realtors. You’ll also have to start saving money regularly by reigning in your spending and making cutbacks. But once you’ve found the perfect property, you may think that the hard part is over. Unfortunately, in most cases, it is not. Getting approved for a mortgage for your dream home is often the most stressful and nerve-wracking stages in the buying process. There are multiple factors that could prevent you from getting a mortgage from having too much debt to errors on your application.

 

But by knowing what these factors are you are better prepared to avoid them. So whether you’ve been denied before or just want to increase your chances of success, here are some common reasons you should know about.

You Can’t Afford It

One of the main reasons why someone will be denied a mortgage is because they simply cannot afford it. Your chosen mortgage lender will start the process by looking at your income and monthly spending habits. Everything will be taken into consideration from your rent payments to how much you spend on gas and food. They will also look at how much you are currently spending on paying off student loans and credit card debts. They use this information to calculate approximately how much you could pay towards a mortgage. If they feel you are unable to afford the mortgage that you have applied for, you won’t get the approval you desire.

Another factor that could affect your application is that you don’t have enough to put down a large enough deposit. The bigger the deposit, the less money you should need to borrow.  If you only have a small deposit but want to borrow a large sum, this can be off-putting to the lenders. If the mortgage repayments are only slightly less than your monthly income, you may find it challenging to pay them. This is why it’s so important that you save as much as you can before applying for a mortgage. Alternatively, you may need to look for houses and mortgages that are more suited to your budget.

Can't Get A Mortgage? Find Out Why

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Poor Credit Score

A poor credit score is another major factor as to why people don’t get approved for a mortgage. Mortgage lenders will always want to do credit checks to analyze your financial history to see if you are a suitable candidate. Your credit score can inform them of late payments, bankruptcy applications and any other debts you may currently have. If there are too many discrepancies and your score is considered lower than their criteria, they will be cautious about lending money to you. The last thing they want is to lend a large sum of money to someone who is unable to pay it back. Your credit report will often include financial information for at least six years. This can be frustrating as some of these red flags might have occurred years ago and have since been rectified.

There are ways in which you can improve your score to help make your application more successful next time. You could apply for poor credit personal loans and pay them back on time. You could also check your credit report to ensure the information is accurate, and no errors have been made. These mistakes could cause you to lose unnecessary points. The only downfall is that boosting your credit score can take time, and this could mean you lost out on buying the property you fell in love with. So it’s always best to check your credit report and start improving it in advance.

No Credit History

While a poor credit score can affect your chances of getting a mortgage, so can having no credit history at all. Many people avoid borrowing money in fear of it damaging their credit score. But in actual fact, not borrowing can make it difficult for lenders to see how you manage your finances. With no credit history, they don’t know how reliable you are and whether or not you will make prompt repayments. This lack of information could be the reason why your mortgage application has been denied. In which case, it would be beneficial for you to start applying for and using a credit card for some of your purchases. Just ensure you are able to pay it off on time and in full to help build your credit history.

If you’re unsure about using a credit card, there are lenders that will work with home buyers who have no credit history. This could help you get the mortgage you need to finalize the sale of the property. You just need to provide them with at least a six-month payment history, which can be used to develop a healthy credit score. To do this, you may have to contact your service providers or landlord and ask them to report your rent, utility bill and phone payments. If this shows that you have made regular payments that are always on time, this can increase your chances of mortgage approval. Always shop around before approaching a lender and make sure you have a clear understanding of what is required.

Can't Get A Mortgage? Find Out Why

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You’re Self-Employed

If you are self-employed, being your own boss will be something you are undoubtedly very proud of. But unfortunately, some mortgage lenders might consider you to be a significant risk. As your income is not as secure or as stable as others, they may think that you won’t be able to make your repayments. Even though this might not be the case, it will obviously be a cause for concern for them. So much so that it could result in your mortgage application being denied. However, you don’t have to change your profession or close down your business to get a mortgage. You just need to work a bit harder than most home buyers at proving yourself.

Many mortgage lenders will work with self-employed home buyers. But only if they are able to provide a good credit score and evidence of regular work such as invoices and bank statements. You may also be required to have your annual income checked and approved by an accountant too. The only downfall is that some lenders will generally only work with you if you’ve been in business for two years or more. This provides them with more information about the stability of your business and your income. But it could, unfortunately, put the buying process on hold and force you to miss out on your ideal home. However, this could give you sufficient time to start compiling financial records and boost your credit score if need be.

Errors On Your Application

You might think that a simple error on your mortgage application form might not be a big deal. But it could be the reason behind why you have been unsuccessful. Mortgage lenders will meticulously scrutinize all of the information you provide to look for issues. This is also done to check for consistency and to see whether you are a reliable borrower. Unfortunately, some home buyers withhold or provide false information on their application in a bid to get the loan they require. This is usually due to them being denied a mortgage in the past. But thanks to the extensive checks carried out to verify the information, these applicants are almost always denied. It’s always beneficial, to be honest, and provide information that is accurate and genuine to increase your chances of success.

Even accidental errors such as spelling mistakes and mathematical discrepancies could affect your application. It could give the impression that you don’t care or that you aren’t able to manage your finances effectively. Unreadable handwriting could also stop them from giving you a mortgage. This is why it’s so crucial that you take your time to fill in your application and give it the care and attention it needs. It’s not something you should do quickly or when you are short on time. So set aside some time where you can read through the application forms and fill them in as accurately and clearly as possible. You should fill it in then check it multiple times to ensure everything is completed in full and correct. If you’re unsure how to do this, talk to a mortgage advisor or use online guides to help you.

Now you know why you might be getting approved for a mortgage; you can start planning your approach more effectively. Whether you have to build up your credit score or use a different lender, there are things you can do to raise your chances of success. Once you’ve accomplished this, buying your new home and selling your old one shouldn’t be an issue. For more support and guidance on getting approved for a mortgage, visit your bank and talk to a mortgage adviser.

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