Potential Problems Getting a Mortgage

Don't get caught out

Mortgages. Unless you’ve found a giant bag full of money in your garden, inherited a great deal of wealth from a relative, are considered “independently wealthy” or have just robbed a bank (we certainly don’t suggest that one) the odds are you’re going to need to secure one before you go ahead and close on your new home.

Potential Problems Getting a Mortgage

However - as it is with any large financial transaction - there are several factors that could potentially crop up on the way to securing your mortgage, or a mortgage in principle, and any one of those could completely derail the process. As a homebuyer, it’s vitally important that you be aware of the pitfalls the could occur when you’re about to get a mortgage.

Luckily, that’s just what we’re here to do!

In this guide, we’ll identify the most common roadblocks potential homebuyers run into when they’re preparing to get a mortgage - so you can be aware of those dangers before you start the process.

Good luck with the buying!

Problem #1: Red Flags on your Financial History

One thing that the bankers are going to check when they look into your financial history is your outstanding debts and amount of credit you can access. If there are significant outstanding debts on your record - and if the amount you can borrow is quite low - that will usually throw up some warning signs for the banks. After all, these aren’t the signs of the financial stability they look for. Do whatever you can to reduce these debts and increase your credit lines before you start the hunt for a new job.

Additionally, if you’ve defaulted on a loan at anytime within the last few years, lenders are sure to see that history; if one of those is on your record, there’s a good chance they will deny the application.

Problem #2: Alarming Personal Changes

Stability is a key factor for lenders. They don’t want something that can change on a whim - they crave consistency and even-handedness for the people they’re going to lend to. So, that means that any large lifestyle changes in your existence may prove to be damning for your chances at getting a mortgage.

Those changes can include:

  • Having a child - Bringing a new life into the world may be a miracle, but it also means more and more expenses - which can put a drain on any household’s income. This may seem incredibly unfair but having a child could prove to be harmful to your mortgage chances.
  • Getting a new job - Again, regarding stability. This may not raise quite such a commotion as others, but moving from one company to another could raise some concerns among lenders.
  • Starting a new line of work - Similar to the last bullet point, but if you’re trading in one career for another - like moving from a corporate job into freelancing, or starting a new business - that potential volatility could have a negative impact on your ability to secure a mortgage.
  • Lots of moves - If you’re moving into owning a home from a long period of renting, than the constant changes of addresses could also prove to be problematic for lenders. Again, stability is a key.

Problem #3: The Gambler

If you’ve been unlucky with betting on a game or the ponies … then your mortgage could be similarly affected. More and more modern banks are examining credit and payout records to look for evidence that you may be paying out to gambling websites. To them, a pattern of those payments equates to someone who may take heavy and rapid financial losses - and then may not be able to pay the mortgage. Something to be aware of if you consider yourself a gambler.

Problem #4: Bad Credit Check

Probably the most common cause for rejection among applicants, and the simplest. When applying for a mortgage, the lenders will absolutely check your credit - and may deny a loan if anything disturbing shows up. It’s always a good idea to go through and get a handle on your own credit (use one of the popular services) before you embark on a mission to get a new place to live.

Problem #5: The "Footprint" Issue

Here’s a potentially-unfortunate aspect of the world wide web: if you’re in search of a mortgage and you’ve been rejected by several sources, those rejections will show up on an easily-accessible report that other banks will be able to look at. Those rejections will deliver a beating to your credit score, and could thus damage your potential for securing a mortgage elsewhere. Be very, very careful about where and when you’re applying. It could have some unintended consequences.

 

Another electronic factor to consider: before you start the mortgage process, it’s essential to make sure that you’re properly registered on the electoral roll, you can do that here free of charge. The banks usually rely on the electoral roll first and foremost to check the credit of anyone who will apply for the mortgage. If you don’t happen to be registered on the roll, the process could take forever - as the bank will have to explore alternate, slower ways of verifying your identity and getting the mortgage started. If you’re not on the electoral roll, get on it before you start the process.

Problem #6: Short Term Loans

You’ve probably seen the advertisements for these types of loans - a boatload of quick cash at an enormously high interest rate. It’s a bad idea to sign yourself up for one, but many people do it anyways. These loans aren’t only bad news for the financial future of anyone who would try to secure one, they’re also devastating for the chances of anyone who might get one and then want to secure a mortgage. Banks will be able to tell when you’ve secured one of these volatile loans, and their presence on your financial report generally doesn’t scream out that you’re one of the financially-stable people they’re looking for.

Posted in Buying a house.

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