Struggling To Get A Mortgage? Estate Agents In Gloucestershire To Help You
by Arina Smith Real Estate 21 May 2021
Have you been thinking about buying a home? Have you recently started considering investing in a new property?
Well, the first thing that you need to do is start shopping for a mortgage! Be it, seasoned property investors or first-time buyers, finding the right mortgage is of utmost importance.
After all, even if a lender is offering a mortgage that is 1 percent lesser than other mortgage lenders, you can end up saving so much money in the future! But, due to the uncertainty of the Covid-19 pandemic and its impact on the world economy, securing a mortgage is not so easy anymore.
Have you been struggling to get a mortgage?
Well, estate agents in Gloucestershire are here to help you!
Here are some reasons why your mortgage application might be declined and how to secure a mortgage for your property investment.
Why your mortgage application might be denied?
Banks and lenders could reject your mortgage application if your credit score is not up to the mark.
Simply put, your credit score is a way for the lender to determine whether or not you will be able to pay back the principal loan amount as well as the rate of interest.
If your credit score is low, the chances are that your mortgage application, as well as a mortgage pre-approval application, will be denied. On the other hand, suppose your mortgage application does get accepted despite a low credit score, the rate of interest that will be charged will be exceedingly high.
Here’s what you can do:
Before you apply for a mortgage or a mortgage pre-approval, start working on your credit score 6 to 12 months in advance.
Letting agents in Gloucestershire recommend that you work on your credit score at least eight months before applying for a mortgage.
In order to improve your credit score, you need to make sure that you have no outstanding debt. Pay off your credit card bills on time, make sure that you pay your utility bills, and reduce your credit card expenditure.
Close any credit cards and bank accounts that you do not use, as those could impact your credit score. Also, you should not take out any new loan, such as a car loan or a student loan, when you are looking to apply for a mortgage.
Deposit and down payment-
Why your mortgage application might be denied:
Earlier, low deposit mortgages were very common, especially among first-time buyers. Due to the uncertainty around Covid-19, the number of low deposit mortgages available in the market has reduced drastically.
So, one reason that you might be struggling to get a mortgage is that the deposit value might be too low. Usually, banks and lenders ask for a down payment of 20 percent of the total value of the property, while the remaining 80 percent is given as a mortgage.
However, low deposit mortgages can give mortgages to people who are putting down as little as 5 percent as the down payment.
Here’s what you can do:
You should start saving money for the down payment for a few months, if not a few years. Then, you need to decide your budget based on how much money you can afford to pay as a down payment.
Usually, it is recommended that you pay 20 percent of the property’s total value as the down payment.
However, the more you put down as a deposit, the lower the mortgage rate. So, either you need to start saving for the down payment in advance, or you need to find a lender that will accept a low deposit mortgage application.
For example, if you are looking at a property for sale in Gloucestershire that costs £310,000, you should try to save £62,000 (20 percent of the total value), which you can pay as the down payment.
Apart from the credit score and the down payment, there are quite a few reasons that your mortgage could get rejected.
One common reason for mortgage application rejection is that the applicant is not earning enough or the monthly income is not consistent.
In this case, you need to show a stable source of income using bank statements and salary slips which will give the lender confidence that you will be able to pay back the mortgage. Another reason your mortgage application might be denied is if you are self-employed.
In order to get a mortgage as a self-employed individual, you will need to show your proof of income, your tax returns for the last 3 to 4 years, as well as your business account statement, which a chartered accountant has signed.
So, before you apply for another mortgage with a new lender, improve your credit score, save for a down payment, and ensure that you have a stable source of income.