Seven reasons mortgage lenders turn you down

House keysIf you're hoping to apply for a mortgage, make sure you get accepted...

Getting a mortgage is a tough task at the moment, with lenders tightening up on who they will accept.

So if you're planning to apply for a mortgage, here are seven things you should be aware of to ensure you get accepted.
1. You can't afford it
When you go to see a lender or a mortgage broker, they will do an affordability assessment based on the deposit or equity you have available and how much you spend each month on everything from gas and electricity bills to your mobile phone to student loan repayments.

If the sums don't add up, you won't be able to get the mortgage you want. The bigger your deposit, the better the mortgage deal you're likely to receive – simply because you don't have to borrow as much money from the lender.
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If you only have a tiny deposit for your mortgage and you need to borrow a large sum from your lender, you may find you get turned down because the lender may be concerned you'll be unable to keep up with your monthly payments (particularly if your monthly earnings are not much more than your monthly mortgage payments).

And of course, since the credit crunch, many lenders have stopped offering mortgages completely for very small deposits – although things are gradually improving. So it's well worth taking the time to save up as much as you can before you rush into applying for a mortgage.

2. You've got no credit history
You may think that never applying for any kind of credit is a good idea. After all, why waste your time getting into debt with a credit card unless you really need to?

But this can work against you.

That's because when you come to apply for a mortgage – which is also a form of credit – you may find lenders are reluctant to accept your application due to your lack of (or rather, non-existent) credit history. This means lenders have no record of whether or not you're good at keeping up with your payments and as a result, they may decide not to lend to you.

To avoid this issue, it can help to build up a credit history by using a credit card – providing you always pay it off in full and on time.

3. You've made too many credit searches
When you're applying for a mortgage, be wary about getting too many quotes. You should check whether or not the lender will be running a credit check on you and if they are, you might want to reconsider.

Too many credit searches in a short period of time can adversely affect your credit score as it can appear as if you're building up too much debt. So don't make multiple applications for multiple deals. You're much better off choosing one deal and then applying for it.

If you do get turned down, don't rush off to apply for several other mortgage deals as this will only make things worse.

4. You're not on the electoral roll
If you're not already on the electoral roll, get on it. Lenders use it to check that you live where you say you do. So if you're not on it, this could affect whether or not you get accepted for your mortgage. Registering on the electoral roll is free. You can do it online at the About My Vote website.

It also bodes well if you have stayed at the same address for a number of years as lenders prefer stability.

5. You're self-employed
If you're self-employed it can be harder to get accepted for a mortgage because your income can be less stable. That means lenders may be worried you won't be able to keep up with your monthly payments.

However, that's not to say you can't get a mortgage if you are self-employed. You can boost your chances by proving you have regular paid work and by ensuring your credit rating is squeaky clean.

You can sign up for a free credit report from Experian. Just remember to cancel your membership before the 30-day trial period is up to avoid being charged in the future. And have a read of How to build an excellent credit history.

Meanwhile, if you're planning to become self-employed in the near future, it's worth getting a mortgage (or remortgaging) beforehand!

6. You've got too much debt
When deciding whether or not you can afford a new mortgage, lenders assess how much outstanding debt you already have. What's more, some lenders even assess how much debt you could have if you maxed out on all your credit cards and overdrafts – even if you haven't actually done so.

So if you have any dormant accounts or credit cards you no longer use, it's well worth closing them. And for those credit cards and overdrafts you do still use, ensure you keep up with your monthly repayments – and try to pay more than the minimum monthly repayment.

This will reduce the amount of debt you have, and will increase your chances of getting a mortgage.

7. You've had financial difficulties in the past
Generally, bad credit will stay on your personal credit file for six years, although missed payments will usually only stay on your file for three years.

However, if you have a County Court Judgment against your name (CCJ) or bankruptcy order, lenders will be able to see this on your credit rating for six years, and this can have a big impact on whether or not you get accepted for a mortgage during that period.

In the meantime, if you want to boost your chances of being accepted for a mortgage and you already have some form of credit, ensure you always make payments on time and keep within your credit limits.

And if you're in a lot of debt and you're struggling, make sure you speak to someone about it.

You can get debt advice absolutely free from places such as Consumer Credit Counselling Service, National Debtline, and Citizens Advice.

They will provide guidance on a range of options to suit your personal needs and help you with your debt problems.

Get advice
Finally, don't forget, if you are looking for a mortgage, it's well worth speaking to a mortgage broker. You can seek advice from our fee-free mortgage team via email, over the phone or even on instant messenger – just head over to our mortgage centre.

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