When applying for a mortgage you will want to avoid doing anything that could hold back your chances of being accepted. You might have already been working hard to improve your credit score and shouldn’t want to do anything that could further implicate your application.
Lenders will want to see that you can afford to make monthly mortgage payments. They will typically use your credit report, your most recent payslips and your P60 to determine this.
We have put a list together of the things that mortgage lenders can view negatively during your application process. You should avoid doing any of these at all costs.
1. Applying to multiple mortgage providers
Many people presume that by applying to lots of different places for a mortgage, they will eventually find a lender who will accept them. In fact, by doing this you can actually make it more difficult for you to get a mortgage. When you apply for any type of finance, the lender will typically carry out a search on your credit file. This will leave a footprint that other lenders will be able to see. Too many applications within the same time period can be viewed negatively by lenders as it can look as though you have a desperate need for finance. By using a mortgage broker you can be confident that we will find you the most affordable and appropriate mortgage for your circumstances.
2. Taking out another loan
You also shouldn’t consider taking out any other forms of credit whilst applying for a mortgage. This includes anything from a car loan to a phone contract. New loans can be a red flag for mortgage providers when you’re in the middle of your application. The reason for this is that lenders base your application on your DTI (Debt to Income ratio) at that time. Any changes such as a new loan will increase your DTI and can create a delay or even cause lenders to reject you. A huge concern for lenders will be whether you can still afford the mortgage payments on top of the new loan you have taken out. They will need to re-evaluate your situation in order to make a decision.
3. Overusing your credit cards
Credit cards are also taken into consideration in your debt to income ratio (DTI). Making large payments on your credit card can affect your ratio so you should avoid doing this before and during your mortgage application. Additional debt on your credit card is a common reason for mortgage rejection, so you should refrain from doing anything out of the ordinary. Any large purchases should ideally be held off until after your mortgage approval.
4. Making a major purchase
Even if you’re not using a credit card to make payments, you should still avoid making any other large purchases when applying for a mortgage. Lenders will want to see that you have plenty of cash available throughout the process to take care of the various mortgage fees. If they see you’ve made a large purchase they might question your ability or intentions to repay your mortgage.
5. Late payments on any current loans
Managing your current loans should be a key priority when applying for a mortgage. Falling behind on any money you owe can be extremely damaging to your mortgage application. If you do, mortgage lenders will likely assume that they can’t trust you to make any future payments on time. This can lead to your application being rejected altogether. It can be especially damaging if you have a history of bad credit and need to prove that you are able to make payments on time and in full.
6. Switching your job
If possible, you should avoid changing your job during your mortgage application process. Lenders prefer you to be past the probation stage of your job role. Many lenders also won’t accept your application if you’ve been in your current employment for less than twelve months. This is because your job can be considered less secure and lenders don’t want to run the risk of you losing your job and not being able to afford to make the payments.