Attention Homebuyers! This Is Why a Lender Won’t Look at Your Mortgage Application Twice!
Not getting a mortgage (and a decent one at that) can be extremely frustrating. It can make your dream of securing your gorgeous home nothing but a fading memory that becomes increasingly bleak as time passes by.
Indeed, there are a number of reasons why banks might decide to shun your mortgage application in this day and age.
For example, banks today tend to scrutinize applicants based on their lifestyle and the type of jobs that they have, rather than the ability to afford the mortgage.
Keeping this in mind, here are some of the reasons why your mortgage application might be getting rejected and subsequent steps to have your mortgage approved.
Mortgage Rejections Are Becoming a New Norm
According to research conducted by specialist lender Together, the main reasons why potential buyers are having their mortgage applications rejected is primarily because of their lifestyles and the types of jobs they have.
Indeed, data collected by Together questioning 2003 individuals revealed that in persons who had failed to get a stamp of approval, about 54 percent of them were denied because they failed to meet what was described as the normal ways of living.
The data collected is as follows:
18% of them were rejected because of a poor credit history and a poor credit score
16% of them were denied because of having significantly low earnings.
13% of them were rejected for having sent too many credit applications and having too much dent
12% were denied based on the type of employment that they had
10% were rejected because they were aiming at purchasing non-standard property
9% were denied because of offering to make a significantly low deposit
3% were denied because of having insufficient employment history
Summarizing the data, Together noted that a majority of the reasons reflected a pattern as to how people live their lives in 2018, rather than their ability to pay back the mortgage.
Breaking down the Numbers
The report further deduces:
When it comes to the employment, ONS (the Office for National Statistics) data has shown that in the United Kingdom, self-employed careers have increased by a whopping 25% in the last 20 years and this rising trend has seen lenders steadily changing their criteria to adapt to it.
Secondly, when it comes to purchasing of non-standard property, numbers of converted properties have increased significantly by 19% in only a year as per statistics released by the English Housing Survey. That being said, it is still difficult to get a mortgage when one would want to purchase a non-standard property.
Last but not least, credit score/credit history has also become a major factor today. Indeed, lenders will reject potential buyers if they have poor education regarding the importance of having a decent credit score.
Automated Systems Also Come into Play
Additionally, the report has also shown that automated systems such as the ones used by lenders in the banking business also play a significant role in rejections.
According to Peter Ball of Together, he believes that there has occurred a paradigm shift in the mortgage market in the United Kingdom.
For starters, people’s way of living has certainly evolved, however, the mortgage market is moving at a much slower pace to keep up with the evolving wants and needs of customers.
This is primarily as a result of the use of computerized systems by lenders, who will automatically decline potential buyers if their history and current positioning do not meet their tick-box model.
The end results means that nearly half of all mortgage applications end up being rejected for failing to meet what is considered the norms of life today.
Millennials Also Facing Issues with Credit
That being said, what is the situation for buyers looking to purchase their first home?
Millennials (who can be defined as individuals between the ages of 18 and 34), face a lot of struggles that are tied to existing debt and their credit score.
This being the case despite more than a quarter of respondents admitting to having their application rejected because of their desire to purchase non-standard property and also because of having unsuitable unemployment.
In fact, the numbers also played out as follows:
31% were rejected due to poor credit history/credit score
19% were denied because of having a lot of debt/ one too many credit card applications
14% were rejected based on the type of employment that they had
14% were denied based on significantly low earnings
13% were rejected because of offering a small deposit
Finally, 12% were denied for wanting to purchase non-standard property
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