One in ten applicants can’t access a mortgage, according to a study of more than 2,000 consumers not in full-time employment.
The study included business owners, part-time workers, freelancers, contractors, those on a zero hour contract, people taking a career break, retirees, full time parents and those on parental leave.
One in 10 respondents said they couldn’t find a mortgage at all, despite almost 48% of respondents having a good credit rating and never having missed a credit payment. 22% of respondents said they’d ‘rarely’ missed a payment.
The survey revealed that 16% of freelancers couldn’t find a mortgage while 20% of those on maternity or paternity leave had the same struggles.
There are a wide number of reasons why a mortgage applicant might have their application refused, here are just a few of the most common:
Poor credit history
One of the most common reasons for a mortgage application being rejected is that the applicant has a poor credit rating. Credit scores are used by lenders to determine how likely a borrower is to keep up with repayments and manage their debts responsibly. Credit scores are created based on an individual’s attitude to debt in the past - if the debt has been well managed it will be higher than if payments have been late, for example.
Small deposit
A small deposit can grind your home ownership dreams to a halt, forcing you to save more before you’re considered for a mortgage. As a general rule, you need at least 10% of the property’s value in order to put down a deposit, but there are some schemes that allow you to buy with just a 5% deposit.
Low income
Lenders will also take your income into account when determining how much deposit you need. Usually, lenders will refuse to lend more than 4-5 times an applicant’s income, so if a prospective buyer is trying to buy a £500,000 home with a £50,000 deposit buy an income of just £20,000 a year, it’s unlikely that they’ll be able to borrow the full amount they need.
Unpredictable income
It’s no secret that self employed workers often struggle to get a mortgage. Lenders can sometimes be reluctant to approve applications from the self employed and this is often in part due to fluctuating and unpredictable income. When income isn’t as regular and guaranteed as it tends to be in full time employment, it can be challenging for lenders to gauge how affordable the loan is.
Thankfully, there are ways to overcome the above obstacles. With the help of a mortgage broker, you can compare dozens of mortgages at once and reduce the likelihood of rejection. A mortgage broker will compare numerous mortgage deals before highlighting those with the lenders most likely to give you the loan you need. To find out how the team at TaylorMade can help you access a mortgage and buy your own home, please get in touch with us today.
