4 Things That Keep Mortgages Away From You
Before the global financial crisis, it was not uncommon to see sub-prime mortgages being offered on the market. After realising the pitfalls of high risk loans, mortgages offered to people with bad credit have become less accessible.
Let’s fast forward to 2016. While having a bad credit score won’t totally prevent you from getting a mortgage, it will unfortunately make your search very difficult.
Aside from that, you can also expect to be charged an above average interest rate and make a higher deposit payment. Some lenders also restrict the amount they lend to people with bad credit score. Expect to be issued one which covers 80 per cent (at most) of the property’s value, Which.co.uk cautioned.
How do you keep yourself from experiencing these hardships? Keep yourself out of the red line, but this is easier said than done.
Which.co.uk explained that getting a bad credit score is really easy, because random factors like missing payment on your bills and loan payments; having a history of bankruptcy; and being ordered to pay money judgement from the court can greatly affect your credit rating.
That’s why it’s highly recommended to first request a copy of your credit report from the following agencies when you start looking for a mortgage:
Bad Credit isn’t the only thing that’s affecting the access of people to mortgages. Having low income, being self-employed, and living in the UK for only 3 years could work against your favour when looking for a mortgage.
The Money Advice Service says that lenders always analyse whether the mortgage applicant’s income would be enough to cover the monthly repayments as well as other living costs before they approve a mortgage application.
Most lenders nowadays also check whether you can still pay the monthly amortisations despite big changes in your personal circumstance such as getting a new baby or in case the interest rates increase.
Surprisingly, self-employed people are also struggling to get mortgages from big lenders.
In fact, The Money Advice Service recommends self-employed people to seek the advice of a specialist before they apply for a mortgage because many lenders require a ton of requirements from them.
You’ll have to show the lender your business accounts signed off by a chartered accountant; your tax returns over a two or three year period; and sometimes lenders may also ask for your business projections to reassure themselves that your earnings will continue to be at the same level or higher.
According to The Money Advice Service, it has become very difficult to find a mortgage provider for immigrants staying in the UK for less than 3 years.
If you’re lucky enough to find one of these few lenders, expect a tough road ahead as they will require a record of your earnings, bank account, home address for at least two years, as well as your visa and employment contract.
In the event that you can’t track down a friendly lender in the UK, you can also look into applying for a mortgage from a lender based in your country of origin as an alternative solution.