Most of us have friends and family members who have applied for a mortgage loan but have been rejected by lenders on various basis. It's really hard to make a definitive list of what will surely get you rejected and what could possibly slip, but there are things we know of, that are easily interpreted as a negative factor by the banks. Read on to discover what they are.
Low income. Your annual income will determine the amount of loan available to you to begin with. There's no point in aiming to purchase a house which is, unfortunately, way beyond your current buying power. In order to avoid disappointment set yourself realistic expectations and either keep to them during your property search, or postpone the mortgage application until your circumstances have improved.
Low credit score. Low credit score and bad credit history are probably the most common reason for mortgage rejection across the whole financial sector. It's vital to check your credit score well beforehand because every rejection further lowers your credit rating and leads to a vicious circle of constantly deteriorating credit history.
Debts in the way. On the surface, it's quite obvious that lenders hesitate to borrow money to the people who already have substantial debts. The other side of the coin is, however, the fact that very few people currently live without relying on credit cards and other credit facilities. If banks limited their customer base to only those people with pristine rating - they'd probably be out of business very soon. It is said that using more than 40% of your available credit will show you in a bad light and reduce the chances of successful mortgage application. Before visiting the mortgage broker, sort your bank accounts first.
Second mortgage. In the current economy banks are very reluctant to borrow money for second and next properties. The justification seem to be the major impact the first mortgage usually has on the applicants budget already. Banks think that second mortgage will cripple your financial ability completely and leave you vulnerable to money related problems.
Inability to understand the small print. While lenders' marketing efforts would have you believe that all there is to a mortgage contract is the length of the loan and the interest rate, it's far from the truth. A lot of people sign their agreements without properly checking them out first and discover unfavourable conditions only a couple of years down the road. If you have problems understanding your mortgage agreement, like the majority of people, consult a person fluent in ‘lawyer-ish' or get in touch with an actual solicitor to have everything explained.
Low income. Your annual income will determine the amount of loan available to you to begin with. There's no point in aiming to purchase a house which is, unfortunately, way beyond your current buying power. In order to avoid disappointment set yourself realistic expectations and either keep to them during your property search, or postpone the mortgage application until your circumstances have improved.
Low credit score. Low credit score and bad credit history are probably the most common reason for mortgage rejection across the whole financial sector. It's vital to check your credit score well beforehand because every rejection further lowers your credit rating and leads to a vicious circle of constantly deteriorating credit history.
Debts in the way. On the surface, it's quite obvious that lenders hesitate to borrow money to the people who already have substantial debts. The other side of the coin is, however, the fact that very few people currently live without relying on credit cards and other credit facilities. If banks limited their customer base to only those people with pristine rating - they'd probably be out of business very soon. It is said that using more than 40% of your available credit will show you in a bad light and reduce the chances of successful mortgage application. Before visiting the mortgage broker, sort your bank accounts first.
Second mortgage. In the current economy banks are very reluctant to borrow money for second and next properties. The justification seem to be the major impact the first mortgage usually has on the applicants budget already. Banks think that second mortgage will cripple your financial ability completely and leave you vulnerable to money related problems.
Inability to understand the small print. While lenders' marketing efforts would have you believe that all there is to a mortgage contract is the length of the loan and the interest rate, it's far from the truth. A lot of people sign their agreements without properly checking them out first and discover unfavourable conditions only a couple of years down the road. If you have problems understanding your mortgage agreement, like the majority of people, consult a person fluent in ‘lawyer-ish' or get in touch with an actual solicitor to have everything explained.