What stops you getting a mortgage?

Whether or not you might get a mortgage essentially comes down to the investment that the mortgage provider is making, and the level of risk they would be taking on. Mortgage underwriters should consider things like whether or not they think you can afford to pay the mortgage, how reliable you are at making payments, and how consistent your income is, among other factors.

In this blog we’re going to go through all the main factors that could stop you getting a mortgage. Don’t panic though, chances are they're all things that you can fix.

If you’re looking for more information about what a mortgage is, you can check out our blog ‘First-time buyer mortgage guide’.

Can you afford a mortgage?

An underwriter will look at your financial situation to see if you can actually afford to pay off a mortgage. There are three main factors that might stop you getting a mortgage as far as money is concerned:

• Failing an affordability check - Most mortgage lenders will look at your household income to see if you can afford the property you’re looking to buy. They’re looking for your mortgage to be between 4 and 6 times your income, although most mortgage providers would prefer to keep it closer to 4. This means anyone looking to buy a house for £250,000 would ideally need a household income between £42,000 and £60,000, depending on your mortgage provider’s preferences.
• Not a big enough deposit - Most mortgage lenders these days are looking for a deposit worth at least 10% of the property value. You would usually be better off if you can provide more than a 10% deposit. The larger your deposit, the more forgiving mortgage providers can be when it comes to other checks.
• Too much debt - Mortgage providers will tend to look very closely at how much debt you have, as well as any potential for debt. This includes any credit cards with very high limits. Mortgage providers want to make sure that they’re going to get their money back, so too much debt could stop you getting a mortgage.

How is your credit history?

Mortgage underwriters will look into your credit history to see how reliable you are at paying back loans. Things that can be seen as significantly negative credit issues, like past repossessions or bankruptcy, are not the end of the world, but you may find it harder to find a provider to back your mortgage. Here are a few more things to keep an eye on:

• Low credit score - Apart from actually going bankrupt, having a low credit score is a big indicator to a mortgage provider that you might not be not a ‘safe bet’. A low credit score may mean you get a mortgage with a much higher interest rate than others with better scores. At minimum you would be looking to maintain a credit score of at least 721, but over 880 would probably give you a better shot. There are all sorts of simple tools online to check your credit score before you apply for a mortgage, just a quick Google search will bring up several options.
• Applying for too much credit - If you’ve made lots of applications for credit or opened a load of credit cards in the months leading up to applying for a mortgage, it shows mortgage providers you may not be able to pay off your loans. Opening a new credit card after having your mortgage approved can also be a reason for a late rejection, so you may want to be careful until you exchange.
• Credit report mistakes - Making a mistake on a credit report can be easily fixed, so it’s not such a big thing to worry about. It is worth keeping a very close eye on all the information you enter in a credit report, though, as mistakes that you miss could stop you getting a mortgage.
• No credit history - Having no credit history can sometimes make it as hard to get a mortgage as it is with  a low credit score. It’s a good idea to have evidence that you can pay off loans, otherwise the mortgage provider will have nothing to go on. For example, you could  open an affordable credit card and paying it off in full each month to build up a good credit score.

What’s your employment status?

Your employment situation tells a mortgage provider how consistent your income is. There are a couple of things that might cause them to lose some confidence. These things could stop you getting a mortgage, but with enough evidence you should be ok:

• Proof of income - Proving your income can be an issue for self-employed people or contract workers. Most people in conventional employment may only be asked for 3 months of bank statements, but self-employed people can sometimes even be asked for evidence from up to the last 3 years.
• Moving jobs frequently - Mortgage providers are generally looking for stability and consistency if they’re providing a mortgage. Lots of recent job moves and salary changes can sometimes lead them to lose confidence in your income stability.

What type of property are you buying?

Mortgage providers are basically investing their money in a property, so they’ll usually want to take a close look at it to decide if it is worth their investment. There are a few things they’ll usually consider that might stop you getting a mortgage:

• Property value - A mortgage provider may decide that the property is actually worth less than what you are planning to buy it for. You may have to provide evidence of planned improvement works to show that it will be worth that much in the future.
• ‘Unusual construction’ - Any house that isn’t built with bricks and mortar is considered to have ‘unusual’ or ‘non-standard’ construction, and could cause a mortgage provider to pull out of a mortgage. Even if the property is super fancy and supposedly well built, you may have to find a specialist provider that is prepared to take the risk.
• Location - If the property is built on a flood plain or something similar, you may have trouble getting a mortgage. Again it’s a question of risk, and if the property has a higher chance of damage you may have to provide a higher deposit than normal.

If you’re wondering what you can do to add value to a property, you can check out our blog ‘What adds value to a house?’.

Other factors that could affect getting a mortgage

There are a few more things that might stop you getting a mortgage for more general reasons:

• Not registered on the electoral roll - You often need to be registered to vote at your current address so that mortgage providers can check your personal details easily.
• Age - Age can sometimes be an issue for old-aged pensioners. Someone living solely from a pension may not have a high enough income to afford a mortgage. In these cases, there are mortgage providers out there with no upper age limit, but it’s worth noting you may be asked to provide a larger deposit than normal.
• Administrative errors - Making mistakes on your application forms can cause issues down the line and stop you getting a mortgage. It’s always a good idea to take extra time and care to make sure that everything on your forms is filled out correctly. If you’re worried, some mortgage brokers offer support in filling out the forms to make sure everything is done correctly.
• Payday loans - If you have regularly taken payday loans in the past, mortgage providers will seriously doubt your ability to pay back something as long-term as a mortgage. You might want to seek specialist support if you’ve used payday loans in the past.

If you’d like to learn a bit more about mortgage brokers, you can check out our blog ‘Do mortgage brokers charge a fee in the UK?’.

A few final tips…

This blog is really not here to scare you, but it is important to understand the factors that could stop you getting a mortgage. Mortgage providers can even decline your application after you’ve made an offer if they want to. If they find a mistake on your application or you suddenly run into unexpected debt, they can reassess the risk at any time right up until you exchange.

Here are a few final things to remember to stop that from happening:

• Filling out all of your application forms correctly and in full will save you a lot of potential administrative annoyance
• You can be denied a mortgage right up until you exchange, so it’s worth being extra careful with credit applications right up until you move in
• Mortgage underwriters don’t want to deny your mortgage, they’re just have to be careful not to take on too much risk

Urban Jungle is not a financial advisor and information in this article should not be taken as advice or recommendation.