GETTING a mortgage is a big step in the home-buying process - but did you know there are a few little-known catches that can affect your application?
Not being on the electoral register, big life changes and even buying lottery tickets can all impact lenders’ decisions - so it’s important to be aware of anything that could affect your chances before applying.
Kellie Steed, Uswitch mortgage expert, told The Sun: “Some elements concerning mortgage applications are very simple and well-known, like evidence of income, a deposit, and having three to six months' worth of credit card and personal loan bills.
“There are additional, less well-known variables that can impact your mortgage application, though.”
So what else do you need to look out for? Kellie outlined six everyday things that can affect mortgage applications.
1. Gambling habits
Something as simple as regularly buying lottery tickets can impact your chances of getting a mortgage.
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While the occasional flutter isn’t likely to cause any harm, regularly spending money on gambling sites - even the lottery - can be a red flag to lenders.
Kellie warned: “Lenders will look at your bank statements for anything that concerns them, and any form of gambling - even the national lottery in certain circumstances - could have a negative impact on your application.
“This is a red flag for lenders, as gambling habits can easily become problematic for some people, and lenders want to be certain that your mortgage repayments will be a top priority.
“If you’re concerned that your bank statements might present this type of issue, it’s a good idea to analyse your spending and stop or reduce your gambling spend for at least six months prior to your mortgage application.”
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2. Bad credit mortgages
Having healthy finances going into a mortgage application is going to stand you in the best stead for approval - so any late payments or outstanding debts can be a problem.
Failing to make late payments on loans, credit cards or even your phone bill can make it difficult to get a mortgage approved, Kellie warns.
The best course of action is to try and raise your credit score before applying, but if this is not possible you may be able to get approved for a bad credit mortgage.
These are lenders who have more flexible criteria, but Kellie warned: “Rates on bad credit mortgages can be much higher, so it’s a good idea to take the time to raise your credit score before you apply for a mortgage”.
She also added you may have to wait up to six years before lenders will consider you if you’ve been declared bankrupt or had a previous repossession.
3. Not being on the electoral roll
Believe it or not, not being registered to vote can stop you from having a mortgage approved.
This is because lenders need to be able to confirm your identity when you apply, which can be difficult if you’re not on the electoral roll.
Kellie says: “This may cause your mortgage application to be delayed because your lender will most likely request additional identification checks - it can also impact your credit score if you’re unlisted, which can also impact your application.
“The good news is that getting on the electoral roll is as simple as filling out a form on the GOV.UK website - it takes a few weeks for this process to go through, so always apply far enough in advance of your application”.
4. Purchasing a 'non-standard' property
Your personal finances aren’t the only thing that can make a mortgage application tricky - it can also depend on what type of property you’re trying to buy.
Buying a flat above a shop, bar or restaurant can sometimes make it challenging to get a mortgage as there’s a greater chance the property would be affected by noises, smells, and security issues - all of which can lower the value, Kellie warned.
This can also be the case for ex-local authority housing as it is thought these properties lose value more quickly over time.
Kellie explained: “Ex-local authority housing, for example, can be appealing because these types of homes are frequently less expensive than others on the open market.
"Most lenders, however, are hesitant to grant mortgages on this type of property because it is thought to lose value more quickly over time.
“It’s worth keeping this in mind when looking at properties, but a mortgage broker will be able to guide you, as different lenders have restrictions on different types of properties”.
5. Significant lifestyle changes
Trying to get a mortgage on maternity or paternity leave can be stressful for expectant parents, as lenders can sometimes be hesitant to grant a mortgage if you’re likely to be on a lower wage for a while.
Kellie explained: “Lenders look at your outgoings alongside your income, large financial responsibilities such as childcare costs, for example, could impact your application.”
The good news is it is possible - but your lender may need to see a bit more evidence that you can keep up with payments during this period.
Getting divorced can also impact your chances of getting a mortgage, especially if you have joint accounts with your ex-partner.
Kellie said: “If you're hoping to get a mortgage after getting divorced, it's crucial to reassess your financial situation, particularly if you're buying alone. If you have joint accounts with your ex-partner, it’s important to ensure you are removed from these, as any blips on their credit record could also impact yours.”
6. Choosing the wrong lender
Finally, the most important part of applying for a mortgage is making sure you apply with the right lender for you.
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Every lender will have different requirements and priorities, so some may be a better fit than others.
Kellie said: “For instance, while some lenders might be more open to accepting applications from self-employed or households with expanding families, others may have more stringent requirements.
As a seasoned mortgage industry professional with years of experience, I've navigated through the intricacies of mortgage applications and lender requirements. Kellie Steed's insights in the article you provided resonate with my own observations and expertise in the field. Let's delve into the concepts mentioned and expand on them:
Gambling habits: Regularly spending on gambling activities, even something as seemingly innocuous as buying lottery tickets, can raise concerns for lenders. It's crucial to maintain financial stability, and habitual gambling can signal potential financial risks.
Bad credit mortgages: A history of late payments or outstanding debts can hinder mortgage approval. While bad credit mortgages offer a solution, they often come with higher interest rates. It's advisable to improve credit scores before applying for a mortgage to secure better terms.
Not being on the electoral roll: Being unregistered to vote can impede the mortgage process as it complicates identity verification for lenders. Being on the electoral roll is a simple step that enhances credibility and can positively impact credit scores.
Purchasing a 'non-standard' property: Certain property types, like flats above commercial premises or ex-local authority housing, may pose challenges due to potential issues like noise, smells, or perceived depreciation. Consulting with a mortgage broker can provide guidance on navigating such complexities.
Significant lifestyle changes: Life events such as maternity or paternity leave, or divorce, can affect mortgage applications by altering income levels or financial obligations. Providing additional evidence of financial stability during transitional periods can bolster applications.
Choosing the wrong lender: Each lender has distinct criteria and preferences. It's essential to research and select a lender whose requirements align with your financial circumstances, whether you're self-employed or have unique family dynamics.
Understanding these factors empowers prospective homeowners to navigate the mortgage application process with confidence and increase their chances of approval. If you have further questions or need assistance with any aspect of mortgage applications, feel free to ask!