Weird Reasons for Mortgage Rejections
28th June 2021
Getting a foot on the property ladder can be tough enough, even when you’re not scuppering your own chances. Despite 95% mortgages coming back and the other kinds of help available, about 80% of first-timers are having trouble landing a mortgage deal. Worse still, half of those have been rejected at least twice in the last year.
The traditional hurdles are still there, of course. You might not have a lot of savings or a great credit rating. You may have debts or be struggling to scrape together your deposit. The COVID-19 pandemic might have put a dent in your career plans or earnings, too. Even just being self-employed can easily raise a mortgage lender’s eyebrow.
With the odds seemingly stacked heavily against you, even a simple misstep can knock your home owning plans on the head. You’ve got to be sure you’re not making things harder for yourself by falling into some of the stranger traps and pitfalls in the mortgage market. Here are a few pointers to keep you on the safe side:
Trap 1: Schoolboy errors
Simple mistakes can come with a heavy cost to your mortgage prospects. If you’re not careful with your homework, it’s all too easy to enter your monthly pay when the form asks for your yearly salary, for instance. If your earnings include boosts from commissions or bonuses, make sure you account for them properly in the paperwork. Don’t just lump them in with your guaranteed pay or rely on guesswork to get you a result.
Even experienced computer users can get tangled up in digital paperwork. Things like auto-filling form fields or scroll-through drop-down boxes are designed to be quick and convenient, but they can just as easily be traps. Double-check every entry in your forms, and don’t rely on your computer to slot the information in automatically.
Trap 2: Looking like a gambler
Mortgage lenders aren’t big on taking risks, and they don’t like dealing with financial daredevils. Even if you’re a winner, with a lot of gambling transactions on your records you’re going to look like a bad bet yourself.
You don’t need to worry about the occasional flutter, but anything that looks like your gambling might cause problems with your mortgage repayments will work against you.
Trap 3: The cost of career success
Strange as it sounds, getting a better job can actually harm your chances of landing that mortgage offer. When a lender weighs you up as a mortgage prospect, they’ll be looking for evidence of long-term stability, not flash-in-the-pan success. Shooting stars burn out fast in a lender’s eyes, so the longer you’ve been in a steady job, the safer you’ll look. If you’re still in a probationary period at a new job, even if you’re making more cash than before, you’ll still look riskier to some lenders.
Trap 4: Scattershot spending
When a mortgage lender looks at your financial situation, they’re looking for patterns – good or bad. Steady, predictable spending habits will usually make them feel safer lending you large amounts of money. Sudden impulse purchases, on the other hand, will count against you. If your bank statements look like a Jackson Pollock painting of random spending splurges - well, everyone’s a critic in the mortgage game...
Trap 5: Dodgy-looking deposits
Scrambling together a deposit can be tricky. You might be pooling together money from a variety of sources, for instance. If you’re a first-timer buyer, there’s a good chance you’ve never had to move this much raw cash around at once before. That can cause quite a few problems in itself.
Your lenders are going to want to know where all the money’s coming from – and they’re not the only ones. People have actually had their accounts locked by the bank because the sudden large payments in and out looked like potential fraud. Having a solid “paper trail” is your best bet here.
Trap 6: Stranger things...
Speaking of paper trails, one thing a lender’s going to be curious about is any transaction that looks out of place. When money gets transferred into or out of your account, it’ll often come with a reference that explains what it’s for.
If you’re receiving payments from friends, they might occasionally think it’s funny to tag the transfer with an amusing name. It’s safe to assume you mortgage lender won’t be laughing at a load of payments labelled “Magic Teleportation Gun” or “Bribe to Foreign Spies”, though.
The point of all this is to make sure you give your lender every reason and opportunity to approve your mortgage. They’re already got plenty of potential reasons to turn you down, no matter how safe a bet you are in reality. Just spend a moment in their shoes and understand what they need to see to say yes.
If you're saving for a deposit and haven't checked if you're due a tax refund yet - take a couple of minutes to do it now. 2/3 people who are due don't claim and it could be an extra £3k boost to your pot.