Many people think they won’t be able to receive a mortgage because of things like affordability requirements or bad credit. With the appropriate guidance, many obstacles may be surmounted, though. Even people without a poor credit history may encounter challenges when searching on their own because high street lenders might be cautious. For the purpose of receiving the required financing, it is essential to comprehend the broad market and several requirements.
The following are some of the most prevalent problems that might prevent you from obtaining a mortgage:
1. Insufficient deposit
Meeting the minimum 10% down payment requirement can be challenging for potential homebuyers seeking loan approval. Yet, in specific situations, certain lenders accept a 5% down payment. Two workaround options for borrowers with no deposit are Guarantor mortgages and family support, providing alternative types of mortgages.
2. Failure to pass the affordability tests
To stop customers from getting the mortgage package they want, mortgage companies employ strict affordability checks. These checks evaluate declarable profits using an income multiplier rule; some checks cap lending at 4.5 times income, while others go up to times 6.
Even if you meet the income requirements, your debt-to-income ratio may have an impact on your ability to obtain a mortgage. Lenders can be concerned if they think you’ll have financial difficulties. Selecting a lender with low-risk tolerance or lower income multiples could be counterproductive. However, knowledgeable brokers can match you with a supplier who is ready to take on more risk and earns a bigger income.
3. A poor credit history
Poor credit, especially in serious cases like bankruptcy or repossession, can make getting a mortgage more difficult. High street lenders judge applicants based on their age, circumstances, and severity. Some lenders might reject applications that pose a high risk, further harming the applicant’s credit report and increasing the likelihood of future financial issues.
4. Self-employment without a source of income
Due to a lack of adequate income documentation, independent contractors frequently have difficulty getting mortgages. Two to three years’ worth of accounts are frequently needed by mainstream lenders to support an application. Whole-of-market mortgage brokers, however, have strong connections with lenders who focus on serving customers who work for themselves and can evaluate non-standard income, even for individuals with accounts lasting 12 months or less.
5. Problems with the place
Purchasing odd or problematic homes necessitates expert assistance from mortgage lenders. For some service providers, non-standard construction can be a deal-breaker due to issues including dampness, Japanese knotweed, and flooding threats. However, mortgage companies that specialize in homes that need work and unusual construction are more aware of these issues and frequently provide better terms than high street banks.
6. Limits on age
After retirement, retirees’ mortgage alternatives are frequently limited by advanced age. However, some lenders give mortgages to older persons of any age, with some offering loans up to 85 and some having no maximum age restrictions.
7. Additional issues that may prevent you from obtaining a mortgage
Numerous factors can cause mortgage applications to be unsuccessful. These include not having your name on the voter registration list, filling out the application with mistakes, and having payday loans. Register to vote online or get in touch with your local municipality to avoid these problems. Brokers can help if you’ve run into problems with your application. Payday loan usage in the past may also cause lenders to express worry.