Getting a mortgage isn’t always easy. There are many factors that can influence a lender’s decision to approve your application, and it can often feel like the odds aren’t in your favour in getting the financial deal you want. Here, we look at some of the most common issues you are likely to face when getting a mortgage and how to overcome them.
A bad credit record
Any sort of bad credit can affect your chances of getting a mortgage. Some lenders will show some leniency and base their decision on the severity of your financial history, and some will regard you as too much of a risk regardless of the circumstances. If you’re unsure whether your credit record has the potential to affect your mortgage application, it’s a good idea to speak to a broker for advice. Because they’ll have a thorough understanding of the market, they’ll be able to match you up with the lender who is most likely to accept your financial background and advise on the best way to improve your credit status. Being turned down for a mortgage can further affect your profile, so don’t hesitate to ask for professional advice before beginning the application process.
Being self-employed
If you’re self-employed, you may have reservations about your getting a mortgage because you don’t have monthly wage slips from a regular employer. However, most mainstream lenders will accept two or three years’ worth of accounts as proof of income, so don’t automatically assume that your employment status rules you out. By talking to a mortgage broker, you may even find that there are lenders who specialise in self-employed customers and are willing to give you finance with accounts covering a shorter period. Every lender is different, and your broker will know which ones have a better understanding of non-standard income and the individual needs of their applicants.
Recently changed jobs
As much as being self-employed can affect your mortgage suitability, changing jobs can also be a hurdle to overcome. Even if your new job comes with a salary that will pass affordability checks, if you’re new to your role, mortgage providers may still deem your application as being too risky. Approving finance to someone who is still in their probationary period, for example, may seem premature, as could approving an applicant who has just started working for a new business with limited trading information. Speaking to a mortgage broker will help you decide your next move as they will liaise with lenders on your behalf who may not see your employment status as a hindrance.
Not enough deposit
Trying to save for a deposit when you’re paying for bills, rent, and other expenses can be hard. Unfortunately, most lenders request a deposit of at least 10%, so they’re an important part of the mortgage application process. If you’re not able to save up this amount, there are other options to explore that brokers will help you with. For example, they may know of some lenders who accept smaller deposits or even provide 100% mortgages with no downpayment whatsoever. There’s also the option of securing a mortgage with the support of a guarantor, so speak to an independent advisor if you’re worried your lack of deposit is holding you back.
Debt-to-income ratio
Even if your salary is enough to meet the income requirements on your mortgage application, if you have a lot of debt, it could cause setbacks. There are no hard and fast rules on what your debt-to-income ratio needs to be, but anything below a 60/40 split (income/outgoings) is seen as low risk. Anything higher may impact your mortgage suitability because having large amounts of debt will make you appear to be a riskier investment. Luckily, there are mortgage providers who demonstrate more leniency when it comes to other outstanding debt, and brokers will know who they are. Speaking to them about your financial obligations will ensure you’re paired with the right lender and help you get an agreement that matches your circumstances.