Applying for a mortgage is one of the most important things you are likely to do in your lifetime. This means when things go wrong, they can be pretty galling.
These can of course be overcome, and with a specialist contractor mortgage broker on your side the process becomes a lot simpler.
But there are some things that need to be looked at on your part. Things that may prevent or limit your chances of securing a mortgage should be addressed ahead of time as best they can be. This will give you a greater chance of securing the mortgage and the property of your dreams.
We have picked out 5 common reasons why contractor and freelancer mortgage applications get turned down. This gives you the chance to look at these areas in your own life and see if anything can be done about them!
1 – Poor Credit History
Lenders will only lend to people they feel will be able to consistently meet payments. As such, having a poor credit history and a high credit score are immediate red flags.
Lenders will inevitably pick up on these regardless of the job you do, and equally if you have too many credit applications, this will raise concerns.
There are things that you can do to lower your credit score and services that can be used. But ultimately this is about getting yourself into the kind of financial situation and financial habits that are sustainable and suitable for mortgage borrowing. If you don’t do this and can’t prove that you are in good habits, your chances of securing a mortgage will substantially reduce.
2 – Insufficient proof of income
A common reason why contractors and freelancers are denied mortgages is because their proof of income doesn’t meet the necessary checks carried out by lenders.
This has always been an issue with lenders, and are partially why companies such as Roots Mortgages exist – to work with lenders and the applicant(s) to ensure full proof of income can be provided and in the required format.
Lenders generally are more savvy these days on this front. But there are things you can do to make it crystal clear how much you earn and what kind of mortgage you can therefore afford.
As a contractor or freelancer, these include having documents such as your SA302 or Tax year overview available. This can be taken from the HMRC website. Full company accounts are also advantageous, as is an accountant’s reference.
3 – Payday Loans and Debt
This is linked to point number 1, but payday loans will alarm lenders and be an immediate red flag. They only stay on your credit report for 6 years, but even though things may have changed substantially since you took out that loan, it could still prove problematic.
Equally the amount of debt you are in will concern a lender if it is too high. It is therefore beneficial to pay off as much as you can before making a mortgage application if you are in a position to do so.
4 – Lender mistakes
Nobody’s perfect, and sometimes a perfectly reasonable mortgage application can get turned down due to an error on the part of the lender. This can happen during the application’s processing stage.
If you are convinced that every i is dotted and t is crossed, and have still been refused, then be sure to find out why. If the reason is because of a lender admin error, then your mortgage might not be off the table just yet.
5 – Going it alone
One mistake many mortgage applicants make, particularly contractors and freelancers, is looking to enter the mortgage market on their own without specialist advice and support.
Granted, many people do the research and secure the mortgage they want. But for tricky applications and particularly for those who are employed in non-traditional ways such as contractors and freelancers, there can be a number of unforeseen hurdles to overcome.
If you go into an application lacking knowledge or understanding around the specifics of your mortgage application, this only heightens the chances of it being denied. That’s a frustrating outcome, but it is certainly avoidable.
Bringing in a specialist contractor mortgage broker can really help to ensure you are on the right path, have everything in order and are approaching the right lenders for the right kind of mortgage.
This way, you can give yourself a better chance of a smoother process with fewer headaches, and be opening the door to your dream home sooner rather than later.