New figures show that one in six homeowners have been refused a home loan in the past. This can impact any future mortgage applications. Inflating your income amount can lead to a mortgage application being rejected.
The highest number of mortgage application refusals in the capital.
Results of the survey show the highest number of refusals was in the capital. Far higher than the national average.
One in three mortgage holders say they had been refused in the past.
Next in line to London for mortgage application refusals is the West Midlands.
One of the reasons banks are turning a mortgage application down has been applicants overstating how much they earn, such as including overtime payments with their main salary.
Some banks do allow overtime payments as part of salary.
While some banks allow this and others permit certain percentages of extra payments to be included, a failure to be clear can result in problems, warns Which?.
It described the results of the survey as surprising and says that many people expect the application process to be straightforward with little chance of being refused.
It is typically those aged between 18 and 24 who are turned down with the numbers reducing as the applicants get older.
Frustrating delays for applicants.
When a mortgage application is rejected can lead to frustrating delays. More than half of those surveyed took a further three months to be accepted for another mortgage.
For some, however, this can result in losing the possibility of purchasing the house they want. For others the result is delays along the buying chain, impacting on others. Stalling the process for many which can end in the possibility of a sale falling through.
Mortgage application noted on credit history.
Applying for a mortgage is noted on someone’s credit history. One lender refusing your mortgage application may result in any subsequent lender querying why the first mortgage application was declined.
“While a mortgage rejection isn’t the end of the road when buying a home, it can clearly have a detrimental impact on the rest of your home-buying experience,” says David Blake from Which? mortgage advisers.
“Ensure you have all the documents and relevant information you need before submitting your application and don’t overstretch your finances by applying for a loan that you won’t be able to afford.”
Mortgage applications can be declined for a number of reasons.
Applications are refused for a number of reasons.
A poor credit score, or being unable to provide proper documents. Are just two.
If you have just started a job or for many who are self-employed there maybe a lack of evidence of payments. In effect, no paper trail to prove income.
Another reason maybe that people are asking for too much money.
And being registered to vote where you live is also important. If you are not on the register this could go against you.
Such simple factors could affect those who have lived in a house share and never had a bill in their name, or someone who moved from place to place and did not change where they vote when they switched.
Which? has advised people to consider getting a “mortgage in principle” which means the lender is willing to give money in theory, thus giving the buyer an idea of the budget that they are operating under.
Longer and more stable credit relationships are important. The advice to buyers is to keep up to date on all bill repayments, as defaults will count against them.
Avoid applying for credit in the three months before applying for a mortgage.
How many times credit is applied for is looked at by lenders. If there are a large number of searches in a short space of time, this could raise alarm bells.
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