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You have found the place of your dreams and you pop along to talk to the bank about arranging a mortgage. You have banked with them for years, have a good job and saved a deposit. Then they turn around and say 'No' we can't lend you the money. This can be embarrassing, and frustrating and cause a lot of pressure and stress. So what should you do? Well in this blog we will explore what you should be doing if you can't get a mortgage.
Why you can’t get a mortgage
Arranging a mortgage can be a pretty simple thing to do for some people but for most can be really difficult. That is because there are a number of hoops you need to be able to jump through before a lender says 'Yes'. The best place to start is to put yourself in the lender's shoes and ask yourself, 'what would I need to know about someone to lend them £150,000?'.
Probably the most common reason you can't get a mortgage is because of 'affordability'. This is how the lender assesses your income, and outgoings and works out how much you can afford to pay each month. Sounds straightforward but all the lenders work this figure out differently. So unless you are being totally unrealistic about how much you want to borrow it's worth doing the research or getting help from a broker in this area. We've put together a handy calculator to work out your affordability on a mortgage. It is easy to use and should give you a good idea of how much you can borrow based on your income, debts and deposit.
Other common areas for a mortgage decline are having a poor credit history, too much existing debt, your deposit isn't big enough, a recent job or career change, not being registered to vote, or you haven't been living in the UK for long. As a specialist mortgage broker, we have lots of expertise in these areas and you can find out more either by checking out the bad credit mortgage page or by using the mortgage check tool.
What to do if you can’t get a mortgage
So if you can't get a mortgage, what steps should you be taking first? Here are some practical things you can do to address the issues and start to turn things around.
Find out why you’ve been refused:
This may sound too easy but it may not be obvious why the lender said no. Make sure you go the extra step of finding out why. As we have looked at before, there are a lot of different areas and pieces of the lender's criteria you could be falling foul of. Until you know what the problem is you can't solve the issue and may give up all too easily. It could be an incorrect spelling of an address, a miskeyed digit, or another admin error that can be fixed quickly. It could be you are a first-time buyer with a poor credit history that is historic or not your fault. In that case, you may need a more specialist lender - have a look over our first time buyer bad credit mortgage page. It may be something more complicated that you've not thought about before. If this is the case it's worth getting help from a mortgage broker who will work with you to find a solution.
Make yourself more attractive to lenders:
It's always surprising how many people that don't know they have a poor credit score. Sometimes you may have been issued a default or County Court Judgement without even knowing you have one. If the lender says they cannot get you a mortgage because of your credit score, your first port of call should be to check your credit history report for yourself. There are lots of free and easy ways to do this. It could be a specific issue on the report or even that you haven't had enough credit in the past.
Make sure that you are registered to vote with your local council. It's easy to check with the local council if you are registered to vote and if you are not you can just register using the gov.uk website.
Take a look at your bank statements to make sure that you are not going over your agreed overdraft limit and that any old unneeded subscriptions are cancelled. If you receive credits to your bank account make sure the reference is something relevant and nothing 'jokey'.
Make sure that you are paying all your existing debts on time each month or if your deposit is big enough it could help to pay off some existing debt to improve your affordability.
Make your money go further:
The lender is likely to lend you more money if you can show that you are able to budget, manage your finances and repay your debts. So managing your money is important especially for the 3-6 months before you apply for a mortgage. Boosting your income by doing overtime at work can help and showing this on your bank statements and payslips may increase the amount you can borrow.
Saving an additional deposit can really help in some situations. The more you can save the less you will need to borrow and the lower your monthly mortgage payments will be. You'll also be seen as a lower risk if you can put down a 15% deposit rather than a 10% deposit.
Look at all your outgoings to see if you can cut back on any excesses in the build-up to a mortgage application. Cutting back on takeaways, nights out, daily coffees, gambling and unnecessary ubers can really add up and make your outgoings look a lot healthier.
Apply with care:
Putting a decimal point in the wrong place, getting a postcode wrong, not being accurate with how long you've lived at the current address or missing out your middle name. These are all reasons I've seen for mortgages being declined and maybe why you can't get a mortgage. You need to make sure all the information is accurate that you provide and that the application form does not contain any mistakes. The lender will be checking things like your name, age, date of birth, national insurance number and address history against databases and other records while you complete the form and can very easily make their system give out the wrong answer if you answer incorrectly.
Make sure you know your income precisely and how this is broken down. What is your salary before tax and after tax? How much do you earn in bonus and overtime? When was your last bonus paid? All this will be on your payslips, accounts or bank statements. A little preparation can make all the difference.
Equally, make sure you have a firm understanding of your outgoings. If you have any existing debt, what are the balances you owe? When will the final payments be? If you are making maintenance payments, how long will you have to pay this for?
If your situation is more complicated make sure the lender understands the complete picture. Don't try to explain something very complicated in a couple of words. There are usually sections to add more information. Explain everything you think the lender would want to know about you, your finances, how they may change and why you are a good bet.
Next steps if you can’t get a mortgage
The important thing to realise is that help is out there. Most people just try to get a mortgage with their bank or at most check out a couple of lenders online. A specialist broker like Twin Pine Mortgages has access to a huge range of lenders and their criteria. We will know if your situation is beyond help or not very quickly and we will be able to give you an idea of this without spending a penny. We can go further and do research and draw up a shortlist of lenders that may be able to help you. So if you have found the house of your dreams and had a 'No' from your bank, don't give up. It may be an easy fix and help is at hand. You can contact us at hello@twinpinemortgages.co.uk or call 024 7601 7747 for more information, help, guidance or even just to ask a quick question.