Whatever your reason for needing to consider a mortgage, there will be some fundamental elements of criteria that will apply, and for some applicants one or more of these may impact your ability to actually be approved.

So, what could be the possible stumbling blocks when looking for a mortgage?  We’ve listed a few of the usual suspects together with some ideas of how these may be resolved to enable success.

Here are 8 reasons you may be denied credit.

• Lack of a deposit or amount of equity
• Affordability
• Credit score
• Property problems
• Age
• Errors
• Complicated Circumstances
• Anything else…

Lack of deposit or amount of equity

Many lenders will now require you to have a minimum amount of deposit or a minimum amount of equity.  Both play a relevance to your loan to value (LTV), being how much you are borrowing in relation to the value or purchase price of the property.

Before the credit crunch there were lenders that would even consider loans in excess of 100% of the value however, in more frequent times borrowers are more likely to require a minimum 5% if not 10% deposit or equity for residential mortgages and 25% for buy to lets.

The amount of deposit or equity you will need will be very dependent on your individual situation however where you find that you may be falling short for your plans maybe some of these could help:

• Continue to save : Not an immediate solution but by putting more of your money aside will give you more to put towards the purchase or reduce your borrowing for a remortgage.
• Be provided a gift or loan from a family member or friend: Many lenders will accept a non repayable gift from someone that you can use or, albeit a much smaller of lenders will permit this, a loan can be accepted.  For some schemes, the person assisting can invest the money to help you in a savings account with the mortgage provider.  They can still earn interest on it and have access to the funds again after a minimum period of say 3 years, subject to the mortgage not being in arrears.
• Use a government scheme – Some housing schemes are available to assist with the amount of deposit you require such as shared ownership. These are always under review so make sure you are up to date with those available.

Affordability

Affordability is perhaps one of the most common reasons people cannot proceed with their mortgage plans.  We will all have a preconceived idea of how much we can afford and how much our budgets can stretch however, a lender will have their own calculations when making their decisions.  Remember a mortgage for many borrowers is a long term commitment and rates can and will change so, ensure you have budgeted for paying your mortgage payment at a higher rate than when it’s actually arranged.

So, if your affordability is restricting your options, what could you do to improve this?

• Increase your income: Having an additional form of income such as a second job or utilising any overtime that may be available at work could improve your affordability.  Many lenders are willing to accept this in their calculations but do be aware that most will require to see a track record at the time of your application and expect it to seem reasonable that it can continue.
• Look for another person’s assistance – Someone may be able to act as a guarantor or, as more widely acceptable now by lenders, for the loan to be set up on a joint borrower sole proprietor basis whereby the person being added to assist affordability has no legal ownership of the property
• Lower your horizons – maybe the property you are considering or indeed the loan size you feel you require are simply too high. The amounts a lender deems affordable and the income multiples they use are based on many years of evidence of how much someone should be able to borrow so, if these calculations show it to be too high then there is a strong probability that it is.
• Use your savings – Where possible reduce the amount you borrow by using some of your savings or, where available, by using a gift from a family member or friend.
• Extend your term – the shorter your term the less interest you will pay overall that is of course a good thing however, what is also true is that the lower the term the high your monthly payment for a capital and interest mortgage. It could be that the term you are asking for means that the amount you need to pay each month is above what a lender feels you can afford.  By increasing the term this may bring the monthly payment to a level that is now acceptable.  You can always voluntarily overpay once all is set up should your scheme allow.  Do bear in mind however that your age will be relevant in regard to the term permitted as lenders need to factor in your retirement and the impact of this on your income.

Credit score

Lenders need to be happy with the risk you pose based on your previous track record of paying for credit.  Any credit issues in the past may have an impact on your chances of success.  To help improve your credit rating or insure it remains heathy, consider the following:

• Make payments on time – A fairly obvious one really but, by ensuring you pay your bills on time will show you are good with your finances and help keep a good credit rating. If your organising skills are more at fault more than lack of funds, set up a direct debit to make sure the payment is made on time.
• Ensure records are correct – an error on your credit file could impact your rating so make sure you check your details and rectify any mistakes you see.
• Close old unused credit – If you have old credit cards or credit facilities you no longer use make sure these are physically closed down. Numerous forms of credit even if inactive can be detrimental to your rating.
• Voters roll – Lenders like to be able to check your address history and see if this tallies up with your application. One simple way of doing this is by ensuring you are registered on the electoral register.

Should you find yourself in the unfortunate situation of having a poor credit rating, you still may be able to obtain a mortgage via a bad credit mortgage, guarantor mortgage, or perhaps a shared ownership mortgage may be the best option for you. For further information on what mortgages could be available to you, contact one of our experienced advisors today who will be able to help with any questions you may have.

Property problems

Lenders do not consider all properties to be mortgageable.  Varying reasons will apply such as the type of construction or the condition of the property.  Sadly, there are some types of property that simply cannot be mortgaged but for those that can, to give yourself the best chance of success try one or more of these.

• Working kitchen and bathroom – these are the two main aspects of a property that a lender will deem necessary for mortgage purposes. They do not have to be competed in glorious decor but must be functional.
• Carry out any recommended works – it could be that certain work or improvements need to be done first so try to do these and revisit your options
• Get a second opinion – one area that is relatively commonplace especially in an uncertain market is the value of a property. If the lender feels a property is worth less than your opinion try getting some comparable properties for them to compare.  These must be actual sold prices and not simply what a property is on the market for, and they also need to be of similar size and style to your own.  If it’s a purchase you may be able to use any down-valuation to your advantage and renegotiate the price.
• Find somewhere else – if buying a property that looks difficult to arrange a mortgage on for you, then remember this will likely be the case for any other potential buyers should you look to sell in the future.  If you think this could cause you problems then possibly think of looking elsewhere.

Age

The one thing we can guarantee that applies to us all is that we are getting older.  We may be able to try and change our appearances to keep us looking younger but ultimately, we cannot turn back time.  Mortgage providers tend to work on maximum ages for their mortgages that typically works on retirement ages.  There are variations across the market but some potential borrowers could find their age means they are declined or at the very least have restrictions of choice.  Whilst we can not reduce our age, some ideas could be

• Find a lender that gives the longest term possible or one that still makes the loan affordable for you each month on the term available. Do ensure your plans for the borrowing still fits within this term.
• Consider a Retirement Interest Only Mortgage (RIO) or an Equity Release. Both of these are specifically designed for those in later life and maximum age is either now irrelevant or much more flexible.
• Arrange the mortgage with someone younger. If this person’s affordability is sufficient on its own you may find a lender will disregard your age as your income is not to be used in their calculations.

Errors

No one makes mistakes on purpose but sadly they do happen.  An error could go unnoticed however, it could be one that has an impact on your application being accepted or not. So

• Double check your data. Ensure the information you have put down for your application is correct.  A simple typing mistake by hitting the wrong key in error can have consequences.
• Check the documentation you are providing to the lender. Ensure items such as payslips are correct or any HMRC and accountancy paperwork.  Even ID has on occasion been proven to be incorrect such as the spelling of names or old addresses on driving licences so get this corrected if this is something you are aware of
• Check your credit file – Errors on here can take time to rectify so it’s always good to check these in advance where ever possible, especially if you know you have had credit problems in the past.

An experienced mortgage broker can help you put together your application and check for any errors, ensuring you have the best chance of getting your mortgage.

Complicated circumstances

No one knows your personal life better than yourself but, when you look to apply for a mortgage, a lender needs to understand about your situation and background, especially when it comes to your finances.  Where this may be a little more complicated than the norm ie complex business arrangements or multiple income sources for example, try to be organised in your paperwork to assist in their understanding.  The better you can present your case the better chance you will have of being approved.

Anything else…

There could be a hundred and one different reasons as to why someone cannot get a mortgage and as such, far too many to list here.  Here at Just Mortgage Brokers we have advisors who are best placed to package together your application to give you the best possible chance of success.  Of course, we cannot guarantee to be able to help everyone but where we cannot see a solution to help right now we can offer advice on where you may be able to improve your chances.

Try out mortgage affordability calculator below.