A recent report by Aldermore has found that a shocking 45% of first-time buyer mortgage applications are rejected at the initial submission stage. A further 20% of those surveyed were then rejected on their second try.

If you are planning to get a mortgage for the first time, then it is wise to check your status in the following areas before doing so. If you work with a mortgage broker, they can also advise you on what lenders may be looking for and guide you through anything you may be concerned about.

Credit History

Lenders will run a credit check on your financial history when you apply for a mortgage. While all have their own criteria, it is a very good idea to check your credit file before they do in case there is anything on there that might cause problems. Most lenders refer to either Experian, Equifax or TransUnion, who are the biggest reporting bureaus.

If you discover something on the report that shouldn’t be there, you can contact the bureau using their online dispute process to have it corrected.

If you have missed loan or debt payments in the past, it could affect your score and you may find it more difficult to get a mortgage. Talk to a mortgage broker if this is the case.

Electoral Register

Are you registered to vote? Lenders will check the register to verify your name and address, so make sure it’s up to date and is the address you are living at now. You can register easily online, although it may take a while for the register to update.

Credit Applications

Each time you apply for a credit card or loan, the lender will check your credit history and this will be recorded on your report, so when you apply for a mortgage, the lender will know about these applications. If there are a number of them in a short period, it may indicate that you are not good at managing your finances and the mortgage lender may decide you are too risky. It is therefore advised not to apply for credit in the year prior to applying for a mortgage if possible.

Debt

If you already have other loans or owe large amounts on your credit card, then the costs of paying these back will impact on your affordability for a mortgage and may even reduce your chances of being accepted altogether. If at all possible, try and pay off as much debt as you can before applying for a mortgage and always make your monthly payments on time.

Payday Loans

If you’ve had a payday loan in the last six years, it will show up on your credit report. Mortgage lenders are wary of lending to those with payday loan history as it implies that you may struggle with your finances and in turn with the responsibility of having a mortgage. It doesn’t necessarily mean you will be turned down though.

Income

When you apply for a mortgage, the lender will use a calculation of a multiple of your income minus any committed outgoings (other debts) to decide how much they will lend to you. If your income is too low for the amount you have requested to borrow, your application will be rejected. Speak to a mortgage adviser before applying and they can work out how much you are likely to be able to get from a lender so that you don’t ask for too much.

Deposit

Similarly, if the deposit you have saved for your house purchase is too small, you may be turned down. Currently, there are mortgages available for those with a deposit of only 5% of the property value (also known as 95% loan to value), but they are limited and will cost more. Again, check with your mortgage adviser to ensure your deposit is big enough for the amount you’re wanting to borrow.

Employment Status

If you are self-employed or a contract worker, lenders will want to see your tax returns for at least the last two years to prove your income and some may also want evidence that you have more work ahead. This means that if this is a new venture, you may have to wait before you can buy a property.

UK Residency

If you have moved to the UK recently, or have been living abroad for a long time, you may find that some lenders will require you to have lived here for three years before applying for a mortgage. You will need to demonstrate that you have the right to live and work in the UK, usually by showing a visa and your employment contract.

Administration Errors

Check that all of your details are correct on all the documents you submit in support of your application. If you use a mortgage adviser, they will also do this, but any errors may delay the submission, so it’s a good idea to check this ahead of time. One of the most common is having an old address on your driving licence, but others we have seen include the incorrect postcode on payslips, employment contracts with the wrong date of birth, and bank statements with the wrong address. It is important that everything corresponds, so look at this now to get mistakes rectified.

If you would like to talk to one of our mortgage advisers to find out more about getting your first mortgage, do get in touch.