Since the Mortgage Market Review in 2014, the application process in the UK for those wishing to be approved for borrowing has become increasingly lengthy. While the review was developed with good intentions, it does mean that completing an application requires more preparation, knowledge and circumstance to be accepted. It’s a fact of reality and something which potential homeowners need to understand.
Since 2014 it has become increasingly difficult to get approval on a mortgage, in many ways simply because there are more reasons to be rejected than ever before. Whilst the list could extend into the hundreds, here are 21 reasons why you might be turned away and a possible solution or remedy to accompany each one.
Proof Of Previous Employment
Lenders want to see that they are making a deal with someone who has been and is consistently hard working and regularly earning. Providing little or no proof of previous employment will almost guarantee a failed application
Solution: Put together a timeline of your employment, with specific start and end dates, if you can’t find or remember them, try getting in touch with previous employers.
Inconsistent Employment History
Another thing lenders get nervous about is potential borrowers whose employment history shows they haven’t remained in the same job for more than 6 months. They like to see someone who is settled and earning a similar figure each month so a scattered history will not amuse them.
Solution: Thankfully lenders aren’t as strict on this as they once were as they take into consideration the financial crash which saw a lot of people unemployed for at least a short while. If you have an unusual profession or unique set of circumstances its best to mention so they at least have some understanding of your inconsistent employment.
Whether you have a record of consistent employment in the past or not, a lender is also very interested in your current situation. If you are currently between jobs or have only just started a new job you’re unlikely to get a deal.
Solution: If you are between jobs or have just begun a new one then you should consider putting the application off. 6 months is the minimum length of time you want to have been in that job before they are content that you will be able to repay them each month.
If you are self-employed or work mostly through being contracted it is often harder to prove where the next pay packet is coming from, something lenders dislike. They want proof of regular income for the foreseeable future.
Solution: Before the application process make sure you can secure as much future work as possible as proof, as well as having all the relevant tax statements and business accounts available to show proof of your employment situation.
It is more than likely that if you have recently been issued with a County Court Judgement (CCJ) or are still paying one off then a lender is never going to come close to you.
Solution: If you have one issued, then make sure you settle the money you owe before applying for a mortgage and have other proof of a good credit history.
IVA’s and Bankruptcy
A IVA is an Individual Voluntary Agreement which is issued to people in dire financial situations by their insolvency practitioner to enable them to pay back any money they might owe without prosecution from those you owe money to. This along with being declared bankrupt are two of the most off-putting things to lenders.
Solution: Don’t even consider going near a lender until you have wiped your debts clean because they won’t even consider you. Get your finances straight and work towards building some positive credit.
Bumpy Credit History
Though this is much less dramatic than the two points above, even missing a few utility bills here and there could contribute to you being turned down for a mortgage. Lenders really do their homework on you, so if your credit history shows a few missed credit card bills they might show concern.
Solution: There is not shortcut to building good credit, you have just got to be sensible and let your history do the talking. If you have missed the odd bill, then put the groundwork in and make sure it doesn’t happen again. Push back your application and spend some time rebuilding a good history.
Little or No Credit History
While it is vital you avoid a bad credit history, you certainly need sort of history to prove you are capable of meeting repayments. This can be tricky for people who have always paid utility bills under different people’s names or have always stuck to a debit card.
Solution: Its time to start attaching your name to those bills, you must prove to the lenders you are capable of consistently repaying something. Whether it’s your mobile phone bill, or a new credit card, you need to develop a healthy history before beginning an application. This example from This is Money shows how brutal enders can be if you have lack of credit history.
As a rule, lenders very much dislike the sight of a pay day loan on your credit file, whether you paid them off in time or not. Any payday loan you have had since 2011 will automatically appear on your file even if you did pay it off in time.
Solution: Avoid payday loans as best you can, Understandably its easier said than done if you have a particularly sticky month, but they can really come back to haunt you, even if you pay them back.
Every time you are denied a mortgage a record is made of it which lenders will be able to see when you next apply. The more rejections you have appearing on your record them more damage it will do to your credit rating. The more credit you apply for the more desperate you look which lenders of course would rather avoid.
Solution: If you have been rejected once, you need to take stock and not appear desperate. You have got to work as hard as possible to improve your current credit solution, so running around applying with different lenders won’t help. At this stage getting the advice of a broker is often your best solution, they won’t advise you apply for any more until together you can find the problem within your application.
Every mortgage requires an upfront fee which will be a percentage of the property’s overall price. The bigger your deposit the smaller your mortgage repayments will be. However the difficult things are saving enough to meet a certain deposit.
Solution: Thankfully over the last couple of years mortgage lenders have made deposits more achievable by lowering the initial percentage. As this from the BBC shows, there are a rising number of lenders offering deposits of 5% and lower.
A lender will be hugely interested in what you are currently earning. If it becomes clear that you current earnings will be impossible to both live off and pay them back, its going to be a straight forward NO from them right from the off.
Solution: Be smart, you know what you earn and what you can pay back. Either understand your limits to save everyone time or save up for a larger deposit so that the repayments will be more manageable on your current wage.
Not Registered To Vote
Being on the electoral register means mortgage lenders can check your current address and make sure you are who you say you are. Failing to be on it will likely see you fall at this first hurdle.
Solutions: You might have your reasons for not being on the electoral register, be it intentional or not, but for the sake of your mortgage it is easy by simply signing up here at Gov.uk
Everyone makes mistakes and unfortunately that includes lenders assessing your applications. They might well misinterpret information you have provided or filed details wrongly.
Solution: Always ask for a face to face interview as part of the application process as well as filling in the forms. Some will happily take the application papers and make a decision, but you are better speaking to them personally to help explain or discuss something they might find unusual.
Living In The UK
As a general rule, lenders are unwilling to make deals with anyone who has lived in the UK for less than 3 years, but not all.
Solution: If the rest of your record looks immaculate, there might well be some lenders out there who will still accept you even if you are under the 3 year threshold, but not many. Chances are you might have to wait it out or get lucky and find the right lender.
Fitting A Lenders Profile
Some lenders operate on a demographic policy, meaning if you don’t fit their bill you are not going to be considered at all. For example some may only make a deal with a settled family in which the parents are assured a work contract for the next year or more.
Solution: it might not be entirely obvious that a lender has this policy because not all do. Its situations like this where a broker (such as Search Mortgage Solutions) can become invaluable because they will be able to save you time by avoiding these lenders and point you in the direction of a deal better suited to you.
While it seems ridiculous, a recent survey by USwitch found that every 1 in 11 women who applied for a mortgage feel they were discriminated because there were either pregnant at the time of application or were planning to have children.
Solution: This is an alarming issue because it would be unfair to turn someone down for a mortgage even if they are having children providing they have stable employment and a good credit history. Hopefully this isn’t a widespread issue.
Insufficient Information In The Application
Some applicants feel that hiding some of their details will give them a better chance of being accepted because it might show them in a bad light to the lender.
Solution: While this is understandable logic, lenders would actually prefer you to show them everything, even if it isn’t particularly positive. It’s always better to be upfront and honest because they will more than likely find out anyway and lying might make you appear even more untrustworthy.
Re-Applying Too Quickly After Rejection
A common mistake made by potential borrowers is rushing to another lender to re-apply once they have been turned down for a mortgage. Lots of people feel hard done by or unlucky when they have been turned down, blaming the lender and ignoring any problems or inconsistencies in their application.
Solution: Check, and check again. There WILL be something wrong with your application, if the lender hasn’t made it clear why, you’ve got to do your homework and find out and alter it before applying again. This is another reason why brokers come in handy as they can spot issues within applications in a heartbeat once they have cast their expert eye over it.
Whether you win plenty of money back or not, a lender doesn’t like the sight of your hard earned cash being deposited into online gambling sites. This is a sure fire way to get rejected.
Solution: While gambling can be fun, there are many examples of it damaging people’s lives. This is why things like Gamble Aware exist. If you are looking to get a mortgage is best to stay as clear from gambling as you can.
Aged Over 40
Research taken out by Intermediary Mortgage Lenders Association which analysed lending across the 24 major lenders in the UK found a trend in the amount of people that were denied a mortgage because of their age. The worry amongst lenders is that if you take on a loan which might run into your retirement, you are less likely to be able to pay it when you are living on a pension.
Solution: Obviously there is no such thing as a time machine, so there is very little we can do about our ages or what we can afford payment wise. The only thing you can do here if you are north of 40 is to prove that you are financially comfortable enough that you will be able to keep up with repayments even when you are no longer in full time employment.