Home Payday loans app Two-thirds of first-time home buyers have had their mortgage application turned down

Two-thirds of first-time home buyers have had their mortgage application turned down


Doors closed: only a third party was able to take out insurance during their first attempt (PA)

First-time buyers are being warned to prepare for rejection following reports that 65% of home applicants have failed to secure a mortgage.

Data viewed exclusively by The independent shows that only a third of first-time buyers were able to get a mortgage on their first attempt, down significantly from almost half before Covid 19.

Almost half of them have been turned down once for a mortgage and a fifth say they have been turned down several times, according to Aldermore Bank’s first-time buyer index. The most common reason is a bad credit report, but a fifth were turned down due to an administrative error in the past year. Another 20 percent did not have a large enough deposit.

Past financial decisions also come back to haunt candidates in other ways. Almost one in five people have been turned down for taking out a payday loan, and a similar number have been turned down due to large debts.

Even irregular income or self-employment has caused problems for one in five people – a situation which is far from rare among this population.

Typically made up of millennials and millennials, half of all potential first-time buyers have experienced a job disruption since the start of the pandemic, heightening fears of credit and mortgage problems.

More than a third have been put on leave but are back to work now, while one in 10 is still on leave now. Five percent have lost income or been made redundant since the start of the pandemic.

“It’s easy to see from the research why many first-time homebuyers may feel daunted by the challenges when looking for their first home,” says Jon Cooper, mortgage distribution manager for Aldermore.

More than a quarter of potential first-time buyers say their credit history is of particular concern, with the main obstacles to a successful mortgage application including overdrafts, student loans and missing bill payments.

“They shouldn’t despair because there are so many options available to them,” Copper adds. “Specialty lenders open the market for those with complicated income streams or past credit problems, ensuring that no borrower, regardless of background, feels left out of the opportunity to move up the housing ladder. .

“I would also recommend using a broker, which can be a great way to overcome the many pitfalls and confusing processes. They offer the big picture of the market and cut through the lingo to offer options specific to a new buyer’s individual circumstances.

During this time, homeowners are encouraged to establish their credit history, especially since young adults rarely have an extensive one.

This can impact mortgage applications as it can be difficult for businesses to assess you and therefore your credit score may be lower.

You can build a credit score slowly but steadily by taking out small forms of credit, like a mobile phone contract, remembering to space out credit requests, and demonstrating your ability to pay them off on time, by showing that you are financially responsible.

Be warned though, as credit cards in particular can have a varying effect on credit history.

Many people keep the same credit card for years. So this is often the oldest credit facility on your report, which means closing it can lower your score, even if lowering your available credit seems like the right thing to do to show you’re a worthy candidate.

If you continue to use a credit card, make sure you stay away from your credit limit to prove that you aren’t too dependent on it.

At the same time, it might be useful to close the credit cards of stores, for example, which were opened recently with high annual fees.

There are a lot of quick things that applicants can do to help improve their credit score too; registering on the electoral roll, setting up levies to ensure that regular bills such as rent, streaming subscriptions and housing tax are paid on time, as well as reducing and / or reimbursing an overdraft or a student loan.

Each of these actions will make it easier to show that you can afford repayments, that you are responsible, and that you take your financial commitment seriously. If you are concerned that your credit rating or history may not reflect this, a mortgage broker can advise you on improving your credit rating and your mortgage options.

When you’re ready to apply, it may be worthwhile to go to specialist lenders, although their rates are often more expensive than what you would get from a traditional lender offering a primary borrower a new mortgage.

Specialty lenders will consider borrowers with CCJs and other past credit issues. You may have to pay a higher rate upfront, but making all of your mortgage payments on time will improve your credit rating, making it easier for you to get a better rate when you apply for a future loan.

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