Martin Lewis has highlighted 'three big things' that often see people rejected from being approved for a mortgage. UK mortgage approvals showed a small rise in June to 58,200, up a little bit from the 56,570 in May. But with hostilities in the Middle East still weighing down the economy and inflation, the housing market is stagnating somewhat. If you are one of the lucky ones to have had an offer accepted on a house you want, seeing it fall through because you can't secure a mortgage can be tough to take.
The Affordability Test
Mr Lewis said: "When you apply for a mortgage, they are going to check whether you can afford the repayments. Sounds obvious, it is, but you need to understand how it works. They're not just looking to see if you can make the repayments at your current mortgage rate; they have to stress test if the rate went up—let's say by one percentage point—whether you could pay that."
"To do it, this isn't some statistical calculation as it is with credit cards and loans; they're actually going to look at your bank statements and other statements at your incomings and outgoings and your income to see if you could make those payments. So if you're close to the brink, it's quite important in the run-up to applying for a mortgage to go frugal for three to six months, so it looks like you've got as much room in the affordability test as possible."
Your Property
There are many different types of properties that lenders don't like. Now, there are no hard and fast rules here, and different lenders will have different views, but let me give you some examples of some of the types of things that have stopped people getting mortgages in the past: If you've got a short lease, that won't do that well. Some types of new builds are not popular with lenders. If there are restrictions in your title deeds, that can make it more difficult. Anything that's counter to normal isn't good. If you're buying a very small studio flat, that won't be particularly popular. Cladding, of course, has been in the news, and certain types of cladding lenders won't lend on the back of. Same with high-rise blocks, although different lenders have different rules on what counts as a high-rise. Really interesting one, this: if you live above a commercial premises—whether it's shops, or restaurants, or even an office—that can affect you getting a mortgage. And anything in the structural survey that isn't good can stop you getting a mortgage.
We have a full guide to - I've only just given you a few of them - all the different things that can be problems when getting a mortgage on MoneySavingExpert.com. And what's really interesting is, even if you do manage to get a mortgage the first time, if it's been difficult, remember when it comes to remortgaging - getting a cheaper deal later once your cheap rate has gone - you may find there's only limited competition, so it won't be as easy. So think carefully about the type of property that you're buying.
Your Creditworthiness
You will be credit-checked when getting a mortgage. This is probably the least important, but that doesn't mean it's unimportant. So, have you paid your debts on time? Have you defaulted in the past? Do you have a County Court Judgment against you? "If you have a really bad credit history, well, that can stop you getting a mortgage. But if you've done well on the affordability score and it's a good property, this probably won't totally kibosh things. But it's important to make sure it's working pretty well in the run-up. And we have a full tool, the MSE Credit Club, which can analyse and assess your current credit files to see what's good, what's bad, and what you need."
