by Peter Jacobs
After all the complicated paperwork is completed to get a new mortgage on your dream home there may come a day when you get a call to say your application has been refused. Why could this happen – we find out…. Although the rules on mortgage applications have not changed that much over the years with the tightening of credit lending still has an affect these days so when you are going through the process of applying for a mortgage loan it’s worth remembering how the following may have an impact with your lender and what to avoid to getting it all correct.
1) Moving jobs – especially from a salaried job
With all things being normal even if you have just started a salaried position with a standard employment contract and have only been with the company a short while your application will be calculated on your current salary. But if you move jobs during the application process especially if you become self employed this can have disastrous effects.
Self employed people used to be able to get what is known as a self certified mortgage where all they needed to do was to tell the lender how much they earned and in many cases this would not be checked. For someone who is already self employed they would have to produce 3 years of audited accounts. So if you suddenly become self employed and have no proof of income for a sustained period of time you may find you application being affected negatively.
2) Reducing your credit score
All lenders take a credit credit from one of the major agencies as a standard procedure and some take another check just before they provide you with your loan. If you start to miss paying off your credit cards or start taking out new loans or credit cards then this will have an adverse effect on your overall score. What you’ll need to do is to tighten your belts during this time so nothing that can affect your credit score is undertaken. You can easily get a copy of your own credit report from one of the major agencies beforehand just to check what is on it and if you need to clean anything up on there that shouldn’t be there.
3) Missing your current mortgage repayments
In a way this is quite obvious but if you have previously missed a mortgage repayment or are currently having trouble paying a mortgage then you may be refused a new one. All is not lost on this and you should talk with your proposed lender or mortgage broker who may be able to find you a suitable deal for your circumstances. Sometimes just talking goes a long way.
4) Having too many outstanding loans and credit card debt
Only you will know if you can afford to take out a new loan and a lender will take everything into account to see if you can comfortably pay back the monthly repayments based upon your current income and your current commitments. So if you already have a few loans and credit cards to repay your offer may not be all it’s hoped to be. You can either add up all your financial loans or look at your credit report which will also show you everything that you owe.
5) The basics being missed
Unfortunately in many cases you still have to complete a manual form to apply for your mortgage although there are a few lenders such as First Direct who can complete everything over the telephone with you there and then. But so many people don’t complete the form correctly or miss out on crucial points. Yes the forms are comprehensive but it’s worth spending the time completing it. If you don’t want to do it yourself then the services of a mortgage broker or independent financial adviser may be useful as they know what lenders want and will complete all the paperwork on your behalf.
Those are the basics for mortgage refusal reasons and having a good credit history and actually being able to afford repayments are perhaps the main reasons for having a loan successfully approved.
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