Reasons why you might be denied a mortgage and how to avoid it

Buying your first home can be a stressful process - so don't let your mortgage application add to your list of concerns. 

Applying for a mortgage can be a long, emotionally-draining process, with a thousand questions to answer and a seemingly never-ending pile of paperwork to get through.

And even though you think you've done everything right, the mortgage lender could turn round and reject your application for a variety of reasons.

Fortunately, there are a number of things you can do to avoid this from happening:

Improve your credit score

Your credit score shows lenders how you manage your money and will help them decide:

• If they should lend you money
• How much to let you borrow
• How much interest to charge you

If you have a low credit rating, there are a number of things you can do to improve it, including ensuring you pay your bills on time and eliminating any outstanding debt.

Register to vote

The lenders use the electoral register to confirm who you are and where you live - and doing this will substantially increase your chances of landing a mortgage deal.

If you haven't done so already, it's incredibly simple to do so by visiting GOV UK's website 

Avoid payday loans

Payday loans are a big no-no as they're listed on your credit file for six years - even if you pay them off on time.

Some lenders see this as a sign that you won't be able to cope with the financial burden that comes with having a mortgage.

Ask for a smaller mortgage

Your earnings are one of the key factors a lender considers when reviewing your application, which can be a hurdle for low-earners.

Fortunately, there are ways to get around this, such as asking for a smaller mortgage or looking at getting Government funding through the Low-Cost Initiative for First Time Buyers (LIFT) or a similar type shared equity scheme available through many House Builders in Scotland. Many lenders will also lend you more money if you borrow it over a longer term. Yes, this will mean you paying more in interest overall, but as times passes and you climb up the career ladder, you can always increase your monthly payment/decrease your mortgage term. 

Save hard for a big deposit

There are more rates available for those with larger deposits so it's worth taking the time to save in order to get the best possible deal.

Opening a Help to buy ISA is a fantastic way to save more money quickly. For every £200 you save, the Government contributes £50, receiving a maximum of £3,000 – and it’s tax-free.

Cutting financial ties with exes

If you're financially linked to someone (whether that be a mortgage, joint bank account or loan), any late payments or misdemeanours of theirs can affect your credit rating.

Avoid this by de-linking yourself as soon as possible.

Keeping a close eye on your overdraft

Fortunately an overdraft won’t negatively affect your credit score – as long as you manage it correctly.

Do this by ensuring you pay off your overdraft monthly and stay within your authorised limit.

Prove you have a steady income

This is more of a concern for those who are self-employed or contractors, but it shouldn't be a problem as long as you can provide tax statements and business accounts for a least the last two or three years.