There are many reasons a mortgage may be denied, but it usually boils down to that they don’t see proof you will pay your payments back on time. Mortgages have to do with your credit, your employment, and your deposit, but there are ways to get beyond your setbacks and show lenders that you will be able to repay them on time. Understanding the reasons people get denied will help you avoid these situations.
You Don’t Earn Enough
One reason that you may not be approved for a mortgage is that you don’t make enough money in the perspective of the lender. Banks and other mortgage providers want you to make a lot more than you have to pay every month. This can be a key reason that lenders deny your request, but there are ways to avoid this. First, you can ask for a smaller mortgage or take it over a longer period. You can also look for a government scheme to help you buy a home or share ownership.
You Have Poor Credit
According to the specialists at the site MoneyPug, which is used as a mortgage comparison platform, your credit score is how mortgage lenders determine whether or not you are reliable to pay the money back. If you have a poor credit score, they are not likely to approve your request.
There are many reasons you may have a poor credit score, including defaulting on payments in the past, applying for many credit applications recently, or using all your available credit overdraft each month. Improving your credit score takes time, but there are things you can do to increase it. Checking up on your score frequently can make all the difference, but paying debts and using a credit-building card are great ways to improve your score.
You’re not on the Electoral Roll
While they don’t necessarily care if you vote, registering can make a difference as far as your credit score and possibility of mortgage approval. Not only do banks and other mortgage providers use the roll as a way to confirm your identity, registering to vote actually improves your credit score. Even if you won’t vote, it can benefit you to register.
If you are self-employed, it can be more difficult to convince bridge loan lenders you have a steady income. Often these lenders are skeptical about people who are self-employed because their income can fluctuate quite a bit. Luckily there are ways to prove that you make the repayments. First, apply with tax records and proof of future jobs. If you show that you’ve been making a consistent amount of money and will continue to have jobs, the lenders will be more likely to approve your application.
You Have a Small Deposit
A larger deposit always helps people applying for a mortgage. If you have a smaller deposit, you will be less likely to get a mortgage. If you are approved, you will likely have the worst rate. A lender may bump up the percentage. They may be worried about repayments as well. It is always worth saving a bit more on the deposit, but if you can take advantage of government schemes to boost your savings and look for lenders with good rates, you can get approved.
You’ve taken out a Payday Loan
Even if you’ve paid a payday loan back in full, they are listed on your credit file for up to six years. Lenders see this as proof you are struggling to manage money and will be less likely to approve your mortgage, although this isn’t the case with hard money lenders Los Angeles. Though not all lenders will turn you down, it doesn’t look good on your application. It may be helpful to wait, the further away the payday loan is the less likely they are to care about it. Make sure it’s paid in full and speak to a broker or financial adviser to find the mortgage providers that will offer you a reasonable rate. While there are many factors when considering a payday loan, now is a good time to apply. If you have can take all of these reasons people are denied into account and use them to overcome your shortcomings, you will be in a good position to apply for a mortgage. Show due diligence and you will be able to buy your dream house.