Advice on Overcoming Common Mortgage Problems
Property does not meet lending criteria
If your application is turned down for this reason, you have two choices. You can appeal for the mortgage lender to make an exception; a more senior person may have authority to bend the rules. The only alternative is to reapply to a different lender. In either case you will suffer a significant delay.
Delayed employment references
Most lenders will not carry out the survey until they have obtained satisfactory employment references. You may be able to speed things up by asking the lender to carry out the survey before they receive references. If you do this, bear in mind that you will lose your survey fee if your references are not satisfactory.
Unsatisfactory employment references
The most common problem is when part of the earnings are paid as overtime, commission or bonus and the employer will not guarantee them. This means that the lender will only allow half their value for mortgage purposes. The way to avoid the problem is to check whether your employer will guarantee your bonuses before the application is submitted. Once the problem has occurred you may be able to persuade the lender to make an exception in your case, but the most likely outcome is that you will have to apply to a different mortgage lender.
If your mortgage is refused because the property does not meet the lender's criteria, or for some other practical reasons, the lender will normally say so. If the application is refused without explanation, it probably means that there is a problem with your creditworthiness.
County Court Judgements
You may have a County Court Judgement registered against you of which you are unaware because it was registered at a previous address. If you suspect that this may be the case, the way to check is to ask the mortgage lender to provide you with the name and address of the credit referencing agent which it used. You can then write to the agency and demand to see a copy of your own file (it costs £1). If you do have a CCJ it will be extremely difficult to persuade the lender to make the loan to you no matter what the circumstances. However, once you are aware of the problem, you can appeal against the judgement if you feel it to be unjust and/or declare it on any future mortgage applications.
Although a CCJ will limit your choice of mortgage lender, many mainstream lenders will lend provided that the CCJ is satisfied (fully paid) and declared on their application form. If you have more than one CCJ, you will probably have to apply to a lender which specializes in impaired credit cases. This may mean that you have to pay more for your loan.
Poor credit references
Your loan may be turned down if other current or previous occupants of your current property have a poor credit history. For example, your adult son may have run up debts before he left home. The way to discover this is to apply for your own credit file as described above.
If you can prove that you have no connection with the other party, you may be able to persuade the lender to reconsider their decision. You can also place your own 'correction statement' on the credit record explaining the situation. This should help to prevent similar problems occurring in the future.
Failed credit scoring
If there is nothing adverse in your credit reference, the most likely explanation for your loan being refused is that you have failed the lender's credit scoring procedure. You can appeal against the lender's decision but the chances of success are not good. The best bet is probably to reapply to a different lender. If you are using a mortgage broker, they will probably have a pretty good idea about why your loan was refused. They may be able to help you to decide which lender to apply to next time.
Not on Electoral Register
The mortgage lender will be very suspicious if you are not on the Electoral Register at your current address. If you are not on it, you should make the lender or the broker aware of this at the time that you make your mortgage application. You will almost certainly have to produce evidence of your residency in the form of, for example, utility bills. Some lenders will require an affidavit (a sworn statement) from a professional person, for example your doctor. Some lenders will turn your application down out of hand if you are not on the Electoral Register.
The survey should be carried out within ten to 14 days of submitting the mortgage application. It is important that the survey is carried out promptly because it is the first sign that the vendor has that your mortgage application is proceeding. If the survey is late, the most likely reason is a problem with your financial or employment references. The other possibility is inefficiency on behalf of the lender and/or the surveyor.
The best way to avoid delays here is to ask the surveyor to commit to a date when he will be able to carry out the survey, and a date when he will be able to submit the final report, before you instruct him. If the survey is not carried out on this date, you can telephone to complain. If the surveyor cannot carry out the survey within a satisfactory timescale, your last resort is to cancel your instructions and instruct another (less busy) surveyor.
It is quite common to find that the surveyor's valuation for mortgage purposes is less than the agreed purchase price. There are several things that you can do to avoid this problem from occurring.
- Instruct a surveyor with up-to-date knowledge of local values.
- Provide the surveyor with particulars of any comparable properties which you have relied upon to form your own opinion of value.
- Choose your surveyor with care - some have a reputation for overcautious valuation.
- If you are applying for a high-percentage mortgage, let the surveyor know that the valuation is critical at the time that you instruct him or her.
If despite these precautions the property is still down-valued, you will have to make a decision on whether you are able to/still wish to proceed.