Get Your House in Order

Many of you may have had mortgage applications declined in the past and wondered why? You may have been frustrated at being declined without being given a reason. This month, I have decided to highlight some of the key areas that can cause a mortgage application to fail. Forewarned is forearmed!

Prove You Exist

Most lenders will wish to clarify the address that you have lived at in the last three years. They will use a number of ways in order to prove your existence. How many of you throw away those nosey slips of paper that arrive from the local authority? The ones that require you to clarify how many people are living in your property. They have a direct impact on your ability to get a mortgage as they are your way of registering on the Electoral Roll. This confirms your residential status and records the dates that you have lived at the property. Nearly all lenders will use this as their first source of information to check where you have lived. If you do not return these slips then you could be making life difficult for yourself in the future.

If they are unable to find you on the Electoral Roll then they will ask you to provide evidence of your addresses used in the past three years. This could be difficult to do if you do not file your bills once you have paid them. I would advise you to keep documents relating to telephone, TV licence, gas, electricity, water, council tax, rent book, insurance documents and bank correspondence. These would all be useful evidence to support a mortgage application. 

Proof of Income

You must be able to prove the income that you declare on an application. The employed are treated differently to self employed and you should be aware of the differences. An employee would be required to produce payslips from the last 3-6 months. These show your gross salary and your net income. Your basic salary will be recorded along with commissions or bonuses that you have been paid. These will also clarify that you work for the company that you have stated. Lenders may also wish to see your P60 from the end of the last tax year. This will confirm your overall income for the year.

Alternatively they may ask your employer for an income reference asking if your employment is permanent and without a foreseeable end. The self employed would be treated differently. A lender would require to see between 1 and 3 years accounts showing the net profit and possibly a projection for the coming year. They are likely to ask more questions regarding future income than if you were an employee. They are certain to request this information from your accountant and ask him to clarify how long you have been self employed.

Bank Statements

All lenders will wish to look at your bank statements from the last 3-6 months. This enables them to look at the conduct of your account. They will look to see that your income is paid into your account and that you haven’t breached any agreed overdraft limit. If you have, then they are likely to require an explanation. They will also look for any unpaid direct debits or cheques caused by lack of funds. 

Late Payments

Nearly all lenders use some form of credit search facility to check your past credit record. Systems such as Equifax will carry details of any loans, credit cards, store cards and hire purchase agreements that you have. The system will log your payment record , current limit, balance, late payments and arrears. Any County Court Judgements and defaults are also noted.

This search will have a great bearing on their decision and if you have any doubts about your past credit record then I suggest you contact Equifax on (0990 143700). before making an application. A list of the information that they hold on you will cost £2. If you have trouble reading the report then contact an independent mortgage adviser who will be able to guide you..

After all of this you may be wondering whether getting a mortgage is possible at all? I advise that if you have any doubts, then do not approach a lender directly. Speak to an independent mortgage adviser as he will be able to guide you as to which cards you actually need to show. This could save you valuable time and effort in securing finance and take a great deal of the stress away. 

Subscribe to the Pink Finance monthly newsletter and keep abreast of what's new on the site by clicking here. Your address will not be shared with any third party and you may unsubscribe at any time.

©2001-2002

Please note that the articles contained within this site were written for Pink Finance and are subject to copyright. They may not be reproduced in any form without prior written permission from the editor. Graphics/images/logos and site design are by John Myers and remain his copyright. Likewise, they may not be reproduced in any form with prior written consent.