The most commonly encountered problems for home buyers relate to mortgage funding. There are two main areas where problems can arise and seriously hamper a house purchase – those relating to personal credit or income references (see below) and those relating to the property you’re buying (see following blog).
1/ Income and credit references
Delayed income references can sometimes hold up your mortgage offer. So it’s worth chasing your employer and checking with your lender that the forms have been filled in correctly. Problems also sometimes arise where your income includes bonuses, overtime and commission, because lenders may only take half their value into consideration.
The solution may be to persuade your employer to guarantee this income, or to find a lender with more generous lending criteria.
To make sure that you are a good risk and do not have a history of running up debts and not repaying loans, one of the first thing lenders do is to check your status with a credit reference agency.
The problem is, that the information they hold isn’t always 100 per cent accurate. For example, your credit reference could also be negatively affected if someone else living at your address or a previous occupant has run up debts. By applying to see your file and proving you have no connection with the other party, you can request that a ‘correction statement’ is placed on your file.
If you have a recent CCJ (ie within six years), mainstream lenders will normally automatically decline a mortgage unless it’s been ‘satisfied’ (fully paid). In some cases you can appeal against a CCJ and apply to have it removed. At worst you could apply to a lender specialising in ‘impaired credit’, but this will inevitably mean paying higher fees and a more expensive interest rate.
Even if your references are OK, a loan can still be refused should you not achieve a high enough ‘credit score’. This is the second major check that lenders make and the longer you have been resident at your current address or with your present employer the more brownie points you should score.
They will also take into account your occupation, your age, whether you have a home telephone and how long you have been with your bank. Self-employed people or those on short-term contracts may score fewer points as they are not such an attractive risk. You will either pass or fail depending on the total points scored.
If a lender does turn you down for credit they should explain whether it’s due to credit scoring or as a result of information obtained from a credit reference agency. Brokers normally know why applications are declined. If your application is refused without giving any reason, it’s probably down to the credit score. Fortunately different lenders operate different systems, so the fact that you have been turned down by one will not necessarily mean that you will be declined by others.
Electoral register problems
Another common reason for being turned down for credit is where the applicant’s name recorded on the Electoral Roll doesn’t match the address they’ve given. Because councils make money by selling our personal electoral details to bothersome junk mail organisations, it can be tempting to avoid registering. But nothing rings alarm bells at Banking HQ quite like missing names or addresses.
If you know this to be the case, perhaps because you only recently moved to your present address from outside the area, it’s important to make it known before applying. A lender may instead be placated with a mix of sworn statements, passports and utility bills. It’s worth checking with a credit reference agency that your name actually appears on the electoral register/voters’ roll at your current address.
Our next blog – coming soon …….
Next Disaster Scenario – Mortgage valuation problems
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