Despite what certain television presenters might like to think, it’s not easy getting on the housing ladder for the vast majority of people. Getting a mortgage can be hard – and stressful. But there are things you can do to avoid problems further down the line. Here are six things that could block your application – and how to tackle them.
You’re not on the voting register?
Let’s start with the obvious one – yet surprisingly common. Many people assume they are on the voting register when they’re actually not. Remember those reminders you get through your door asking you to confirm who’s in the household for polling purposes? It always makes sense to fill those out, just in case. Mistakes do happen and people do sometimes vanish of the register in error. But most of us simply forget to reregister when we move house. It’s dead easy to rectify this one, just contact your local Electoral Office. https://www.gov.uk/contact-electoral-registration-office
Defaults or late payments
County Court Judgements (CCJs), bankruptcies and bills you’ve just not paid. These are all things that can find their way on to your credit file and mess up any application for credit. Yet credit files can often be a mystery. For a start, you can often have a good score with a credit reference agency and still get turned down. That’s because different lenders can look for different things and decide whether to offer you the mortgage off the back of the answers they get. Minor defaults or late payments can have an impact on getting credit – even if the error isn’t your fault. Any credit agreement you have will appear on your credit file along with a range of other things. Mistakes can and do happen, so it makes sense to go to the three main agencies; Experian, Equifax and TransUnion (other brand names operate using the same data). If you dispute anything on file, the agency can help you to correct it, but it may take a few weeks up update on the system. Your statutory credit file is now free – though the agencies all offer paid for services too.
You failed the lender’s own credit scoring procedures
This can happen even after being given and ‘agreement in principle’ which isn’t a guarantee you will be given the mortgage. An agreement in principle is based on the basic information the mortgage provider has been given by you or a broker. But when it comes down to the crunch, you still have to pass all the lender’s criteria formally. It’s not just about clearing the credit reference agency check. There are a range of criteria – from consistent earnings to a having a big enough deposit and financial stability– that must be met before you get a formal offer of a mortgage.
You’ve had too many applications for credit
Credit reference searches can sometimes go on to your file. These are known as ‘hard searches’ where a business makes a complete check of your file. A ‘soft’ search is where the business might just check some of the data to give you an indication as to your chances of actually succeeding in passing a check. This matters because hard checks appear on your file whereas soft ones don’t. It’s not just loans, credit and finance that show up. Credit file checks can come from mobile phone contract applications, utilities firms, landlords, letting agencies, debt collection, employers and more. If you have a number of hard checks in a short space of time then this can suggest that you’re over extended with your borrowing. The good news is most hard checks fall of your file after 12 months so you can wait them out. Appeal anything where you have not authorised the check.
Typos and non-compatible information
Mortgage applications and surprisingly antiquated – and lenders are notoriously sensitive to allegations of inappropriate lending. So the whole process of applying for a mortgage can be fusty and bureaucratic. But even minor errors – like subtle differences in your address from official documents or estimated timescales for things like employment that might be checked – can lead to the computer (or human) saying no. As the Mirror recently reported https://www.mirror.co.uk/money/couple-refused-mortgage-335000-home-26161921 societal changes, like using the title ‘Mx’ can throw out the system and result in a rejection. I would never ask anyone to compromise who they are to get a mortgage, but be aware that until the system catches up, this can – and does – have an impact.
You’ve teetered on the brink of success
Many mortgages get turned down because you are close to the threshold for success, but little things add up and work against you. Having a few debts that you never miss payments on can have an impact if the lender feels your borrowing ability is tight and you’d be better off served by clearing those debts first. But bear in mind lenders have different criteria and you might find a more sympathetic one through a broker elsewhere. The more of a risk you are, or the lower your deposit, the higher the interest rate could be. So taking some time to get your debts cleared, your finances in order and a bigger deposit is the best way to get on the housing ladder.
Featured in Mirror – Martyn James