The difficulties of obtaining a mortgage

Recently the British Bankers Association has suggested that the declines in the level of lending for mortgage purposes from both banks and building societies have been due to a lack of consumer demand.

This is not quite the case as very many applicants are being turned down or being offered lower amounts than requested.

Although the number of overall mortgage products has increased, sadly, the reality is that most of these products are only available in the low loan-to-value, (LTV) arena, around 70% and below. What is really needed is more innovation in the 80% to 90% loan-to-value market.

For those looking at borrowing, preparing your documentation before you start applying for a mortgage is important. The amount you can borrow is no longer simply linked to a multiple of your income but on an affordability basis linked to your overall credit score.

The lender’s credit score can be tightened and loosened at will as a lender decides exactly when to increase or decrease their lending levels. A good three-year address history is an advantage and it helps dramatically to be registered on the voters roll at your current address.

Monthly outgoings are taken into account, so a small credit card you could pay off, but choose just to pay the minimum, could affect your borrowing.

The number of dependents you have also has a bearing, as will any outgoings such as childcare. This means that although they may be on the same incomes, a couple with no children or credit card debts may be able to borrow substantially more than a couple with two children and outstanding credit card balances.

In terms of documentation, lenders will want to see your last three months’ payslips and last P60 as well as potentially your last three months’ bank statements. These must be sequential with no single statement missing. Many lenders do not like internet bank statements, even though they encourage their own customers to switch to online statements.

A good mortgage consultant will guide you through these obstacles in a clear and concise way to ensure that you are not disadvantaged by insufficient or erroneous data being given to potential lenders.