11 Reasons Why Your Mortgage Will Fall Through
You might lose your dream home because of a wrong keystroke!
Did you know that a single wrong keystroke could cause your dream of owning your first home to come crashing down? This is a frustratingly common issue that many people face while trying to close a mortgage agreement. When you’re getting pre-approved for a mortgage, it’s important to be aware of the reasons that can lead to your mortgage application being rejected or falling through.
So, let’s take a closer look at some of the factors that could cause your mortgage loan to be declined or fall through.
Applying for the wrong type of mortgage
There are various mortgage options, each with distinct eligibility requirements. For example, if you’ve had a mortgage before, applying for a first-time buyer mortgage may result in your application being rejected.
You are not registered on the electoral roll
It is important that you apply to be on the electoral roll as soon as possible if you haven’t already done so. Being on the electoral roll is necessary to confirm your address, as lenders use this information to verify your credit score.
Failure to register may result in a rejected mortgage application. It’s worth noting that registering on the electoral roll is completely free. And, ya know, means you can vote too.
Income, affordability and debts
Your income is an important factor that mortgage providers consider when assessing your ability to repay the loan. They take into account your current debts to determine if you can handle the additional financial burden of a mortgage.
The amount of debt you have on credit cards, store cards, and loans can impact the lender’s decision. However, other factors are also taken into consideration. If you have responsibly managed your debts, you may still be approved for a mortgage as long as the lender believes you can afford it.
It’s important to be cautious after applying for a loan as well. Using credit to make a large purchase may raise a red flag for lenders because it affects your debt-to-income ratio.
Job change or loss of employment
A change in your career, such as starting a business, losing your job, or being demoted, can put your mortgage at risk. Lenders may consider these changes as potential risks of default, particularly when evaluating whether your income is sufficient to cover your monthly payments. Therefore, it’s essential to maintain open communication with your lender beforehand.
Although changes in employment status may not necessarily disqualify you, if your lender determines that you’re not eligible, they may advise waiting until you can show enough income from your new job.
Small deposit
If you have only managed to save a small deposit, your mortgage applications may be rejected. However, there are specific mortgage deals available for smaller deposits. Even if you have a deposit of only 5-10%, there are lenders that you can choose from, but you will need to search for them.
If you are unable to find a suitable lender, you can try saving up for a longer period of time so that you can have a larger deposit. Alternatively, there are government schemes that can help you if you only have a small deposit.
Valuation is lower than purchase price
A low property valuation can create issues when the valuation of the property is below the agreed offer. This can lead to a disruption or delay in funding. It happens when the assessed fair market value falls short of the agreed-upon amount, creating a mismatch with the loan.
To avoid this problem, you can consider options like making a larger down payment or negotiating a lower asking price.
Major problems after home survey
A home survey is a crucial step in the home-buying process that can reveal unforeseen and expensive repairs. These issues can cause delays or even halt the closing process. Problems such as damaged roofing, faulty wiring, plumbing or HVAC issues, drainage problems, structural damage, or overall poor home maintenance might be discovered during the inspection.
If you have included an inspection clause in your purchase agreement, you may want to negotiate the purchase price to account for potential repairs, request the seller to address the issues, or, in extreme cases, back out of the transaction altogether.
Not matching the lender’s profile
Lenders use unique criteria to assess mortgage applications, including age, income, employment status, loan-to-value ratio, and property location. If you apply to a lender that does not match your profile, your application may be denied.
Title issues
A title search is a thorough examination of public property records to uncover any potential issues.
For example, existing liens can obstruct or even halt the closing process. Liens represent legal claims against the property that are used as collateral for debt repayment. To avoid delays, buyers can purchase title insurance. Additionally, sellers should ensure that they clear any outstanding home-related debts before listing the property.
Closing delayed due to documentation
To ensure a smooth closing process without any delays caused by incorrect or missing documents, it is important to maintain communication with your lender. This will help you ensure that all necessary documents are submitted on time and in the correct format. By staying in touch with your lender, you can also address any questions or concerns you may have, and prevent potential issues from causing delays or even jeopardising the deal.
Why do you need a broker?
1. A mortgage broker has extensive knowledge of the market and can help you find a lender that matches your financial profile and underwriting criteria.
2. They will assist you in finding a lender that accepts your deposit or advise you to save up according to market demands.
3. A mortgage broker can help you understand your finances and ensure that you don’t apply for or finance another product during the mortgage deal.
4. If you have a particular location in mind, such as living near a pub or petrol station, your mortgage broker will advise you on lenders’ criteria so that you can make an informed decision.
5. Mortgage brokers and estate agents have more recent and wider market knowledge than you. They will warn you if the asking price for a property is too high and direct you to the right lender to avoid delays or fall-throughs.
6. An experienced mortgage broker will double-check the required documents to avoid delays due to incorrect information.
7. Some lenders operate exclusively through mortgage brokers. Brokers can leverage their business volume to secure lower interest rates compared to what individuals may obtain independently.
8. Mortgage and lender collaborations may entail various fees, such as origination, application, and appraisal fees. Mortgage brokers can sometimes negotiate with lenders to have some or all of these fees waived, leading to potential savings ranging from hundreds to thousands of pounds.
