December 22, 2015

5 Obstacles That Can Stand in Your Way of Getting a Mortgage

A deposit may seem like the largest hurdle to overcome when looking to buy a house, but in reality, there are numerous obstacles that can stand in a first time buyer’s way.
In this post, Gorvins conveyancing solicitors look at some of the primary reasons why someone may be turned down by a mortgage lender.

A lack of credit history

If you’ve never needed a credit card in the past, you may think that lenders will assume you’re sensible with your finances. However, never having a credit card can make it difficult for lenders to determine whether you’re good at paying back any money that you do borrow.

As a result, if you’re saving up to buy a home, it can be a good idea to take out a credit card so you can gradually boost your credit score. Don’t apply for several cards in a short space of time though, as this can actually do more harm than good as lenders will assume you’re desperate for money and not living within your means.

Your income is too low

Lenders will also take your income into account when assessing how much they’re willing to lend you. The more you earn, the more you’ll be able to borrow. Some lenders, for example, are willing to provide home buyers with a loan that is up to four times their annual salary, but this will vary between mortgage providers.

You’re self employed

Becoming self-employed can sometimes be a lucrative career move, but for those looking to secure a mortgage on their first home, it’s best to stay in full-time employment for as long as possible. Since self-employed workers often face income fluctuations, mortgage lenders often raise concerns that borrowers may struggle to repay the money they owe.

You’ve started a new job

Some lenders will only offer mortgages to those who have been in the same job for a certain period of time. The amount of time required will vary between lenders, but it can vary anywhere between three months to a year.

Your partner’s finances are poor

If you’re financially linked to someone else and they have a history of being bad with their money, this could make it harder for you to borrow money. This can be the case even if you’re in a strong financial position yourself.

Your ability to borrow the money you need to buy a home could also be affected if you and your partner have separated. You may be able to ‘delink’ yourself from this person by writing to credit reference agencies and asking for a notice of disassociation.

It’s important to be aware that if you apply for a mortgage and get rejected, this in itself could have an impact on your credit score. So if, after reading the obstacles above, you have any concerns about your worthiness to borrow such a large amount of money, it could be worth seeking the support of a mortgage broker. A broker will know the mortgage market inside out and will recommend you apply for mortgages only with those likely to accept your application.