When it comes to applying for a mortgage, the criteria can feel a bit like witchcraft. Lenders will put your finances under a microscope, and if you don’t tick all of the boxes they can decline you right away. And while every lender’s criteria are slightly different, there are some things all lenders see as red flags on a mortgage application. So today we want to share those with you so that you can make sure your application is successful.
Poor Credit History
The first place to start is your credit file. This will give you an idea of what your current credit score is, as well as any ‘black marks ‘on your credit file. You can check your credit file with most of the main credit reference agencies, including Experian, Equifax, and TransUnion. and see what information they have on you (in fact you can get a report from all 3 here – these 3 are the agencies that most lenders use a combination of). This also allows you to make sure all of the information they hold is correct so that your mortgage isn’t declined on a technicality.
Gambling Transactions
Let’s be clear here- putting the odd £5 bet online at the weekend isn’t going to raise any red flags. The issue will be if they see multiple small transactions to gambling sites appearing frequently. Putting several £5 deposits to a gambling site in one day shows a lack of planning and a tendency for risky spending -neither of which are risks that most lenders want to take.
Not Registered To Vote
This might seem like an odd one, but it makes a lot of sense really. You need to be on the electoral register at your current address in order to vote and this is how lenders verify who you are. So even if you have never voted and never intend to vote, it’s still worth getting yourself on the electoral register. Its’ simple and quick to do – and you can even do it online using this link.
https://www.gov.uk/register-to-vote
Too Many Credit Applications
When you apply for credit of any kind, the lender will do a search of your credit report to check your suitability. Most of these searches will leave a kind of ‘mark’ on your credit history, which shows other lenders how often you have been applying for credit. Applying for lots of credit over a short amount of time makes it look like you have money problems, which in turn reduces the chances of being approved for a mortgage or getting the deal you want. To avoid this, try not to take out any finance agreements for at least a year before you apply for a mortgage. In addition to this, be wary of making a lot of enquiries for credit agreements, these will often leave a “footprint” on your credit report. If you are using a mortgage adviser, any decision in principle we would make would normally be done with a lender that leaves a “soft footprint” so as to not damage your credit report unnecessarily.
Too Much Debt
Having a lot of debt against your name already will give most lenders pause for thought but for a mortgage, it’s a big issue. Too much debt will drastically reduce your chances of being approved. If you have money worries, it’s always worth addressing them using some of the free support and resources available online and through your council.
Payday Loans
Payday loans are always a tricky product, and most advisors will advise against them at all costs. This is partly because every single payday loan you’ve had in the last 6 years will be listed on your file, even if you paid it off on time. And it can still count against you even after all this time, as lenders think you can’t cope with the financial responsibility of having a mortgage. The exact impact it will have will vary from lender to lender, so it might not discount you from a mortgage, but it may count against you.
Administration Errors
Lenders aren’t perfect – many will put the details from your application directly into a computer, and mortgage applications can be rejected because of a mistake on the application or your credit file. If your lender tells you that your application failed based on your credit file, it’s worth checking it for errors.
Not Earning Enough
Finally, a lender doesn’t want to see earnings that are lower than the repayment amount. Affordability criteria are quite strict, so if you’re applying for a mortgage above your means, it may be turned down. If this happens to you, you can apply for a smaller mortgage or see if you’re eligible for support from government schemes.
At GP Norgate we specialise in helping people who have struggled to get mortgages in the past. The more complicated the better! so if you think any of these issues might apply to you, we would love to help. Just get in touch with us today to book your initial consultation.
GP Norgate Financial Solutions are a trading style of Easy Street Financial Services Limited who are responsible for the advice.