This guest blog post is written and provided by Ryan Smith who is part of the content development team at Local Financial Advice, connecting people with independent financial advisors in their local area, to help them achieve their financial goals.
A couple in their 40s have recently been rejected for a mortgage by HSBC bank - on the grounds that the husband would be too old by the time the term was complete.
The financial ombudsman upheld their complaint, and the bank was forced to pay compensation, but as anybody who has gone through the process will tell you, applying for a mortgage is one of the most stressful financial circumstances you are ever likely to experience.
As well as seeking professional advice from an independent financial adviser, there a number of steps you can take to try and increase your chance of being accepted for a mortgage.
Check Your Credit History
There are 3 credit reference agencies than can provide you with a copy of your credit report:
You have a legal right to check your credit score, though the reference agencies will charge you. Many of the agencies will offer a free trial for you to check your rating, though if you wish to review your credit report in the future you will have to sign up for a paid account.
It’s worth checking all three agencies as they each hold different information.
Register to Vote
Lenders need to be able to confirm where you live before they can accept you for a mortgage.
The easiest way to do this is by registering on the electoral register. It’s a quick process, and should take you no longer than 5 minutes on the UK government’s official site.
Alleviate Some Of Your Spending
Lenders don’t just look at your regular in and out-goings (wages, rent, bills etc.): they’ll want to know everything that you spend. This can include anything from what you spend on groceries and fuel, to how much of your cash goes on clothing or socialising.
They’ll also know whether you occasionally dip into your overdraft, so if you’re prone to drifting into the red at the end of each month, it’s worth postponing your application for around 6 months until you’re on top of this over-spending.
Even though only around 1 in 4 mortgages are rejected, according to the Intermediary Mortgage Lenders Association, sometimes this could happen, so it’s worth being prepared for this eventuality.
First of all, it isn’t worth getting panicked or upset over a rejected mortgage application, even though after saving up the deposit and finding the right property it can feel like a crushing defeat.
There could be any number of reasons why your application was declined: most of the time it’s due to the specific lender you applied with not being happy about specific details. Every lender has a different policy, so just because you’ve been declined a mortgage from one, doesn’t mean you will be rejected by all.
Check Your Credit History
If you hadn’t checked it before you applied, now is the time to take a look and see if there are any strange things lurking on your credit report. It could be something as simple as an anomaly in your past residence history, or something more serious, such as a fraud case alerted on your account.
Take a look, and then take steps to improve your rating or fix any other errors you see on there before your next application.
Talk To A Mortgage Broker
A mortgage broker (whether fee-free or working on commission) will be able to look at your financial and personal circumstances and cross-reference them across a number of mortgage lenders.
They also have expertise in matching you with the lender most likely to accept your application. As mentioned previously, some lenders will have certain criteria that they may not have outlined before you were rejected; a broker will know about this and point you in the right direction.
Some brokers will even specialise in certain circumstances, such as finding mortgages for those who are self-employed or for those with poor credit history.
They may even have deals in place with lenders to provide better rates than you can get directly.
Seek Independent Financial Advice
If you’re struggling to be accepted, it may be worth seeking an independent financial adviser who can help you with your finances in the future.
There could be any number of reasons for being declined an application, but a financial adviser will be able to take all of your circumstances into consideration and figure out the best course of action for you moving forward.
If you are in the market for buying a property, do contact yourlocal Martin and Co office.
You can also search thousands of properties on the Martin and Co website
Disclaimer: Guest blog posts on the Martin and Co blog are written by external companies. Martin and Co do not endorse the products or services of these companies.