What Stops You Getting a Mortgage? 9 Key Factors to Know

Securing a mortgage isn’t always easy. 

Some people find it tough to save for a deposit. Others struggle to find lenders with flexible terms. Many face challenges with their credit score. 

These things can get in your way.

But don’t worry – knowing what they are is the first step to beating them.

To help you, we’ve laid out the main things that could stop you from getting a mortgage. 

By understanding these hurdles, you can plan better for your application. 

This way, nothing will stand between you and your new home, and you can apply with confidence.

Common Mortgage Approval Pitfalls

Knowing what to expect makes the mortgage process easier. Here are 9 key factors that may stop you and how to fix them:

Insufficient Income

Your income significantly affects the mortgage you can get. There’s no official minimum income, but low earnings can limit your options.

This means you might struggle to find a lender willing to offer you a mortgage for the property you want.

To boost your chances:

• Apply with a partner or family member to increase joint income
• Increase your income through promotions or additional work
• Explore government schemes like First Homes or Shared Ownership

Inadequate Deposit

Most lenders require a minimum deposit of 5-10% of the property’s value. 

A larger deposit not only improves your chances of approval but also gives you access to better interest rates.

To build your deposit:

• Set a savings goal and create a dedicated savings plan
• Consider using government schemes like the Lifetime ISA
• Explore family assistance options, such as gifted deposits

Remember, a larger deposit also reduces your loan-to-value (LTV) ratio, potentially opening up more favourable mortgage deals.

While possible, 100% mortgages (where you don’t need a deposit) are rare and expensive. 

Lenders typically charge higher interest rates and impose stricter rules. You might also need a guarantor, such as a family member, to cover your payments if you fall behind.

These mortgages often target specific groups, like first-time buyers through government schemes or certain professionals. 

But, buying without a deposit means you own no share of your home. This is risky if property prices fall.

High Debt-to-Income Ratio

Lenders want to ensure you can afford your mortgage payments alongside your existing financial commitments. 

A high debt-to-income ratio – the proportion of your monthly income that goes towards paying debts – can be a red flag.

It shows you’re already using a large chunk of your income to pay off debts, leaving less for a mortgage.

To improve your ratio:

• Pay down existing debts where possible
• Increase your income through a pay rise or side hustle
• Avoid taking on new debts before applying for a mortgage

Aim for a debt-to-income ratio below 43%, as this is often the maximum that lenders will consider for a mortgage. A lower DTI ratio makes you a safer bet for lenders, increasing your chances of getting a mortgage.

Check your DTI ratio here to see how lenders view you before you apply for a mortgage.

Not Passing the Affordability Test

Affordability checks are when a lender checks if you can pay back a mortgage. They look at your income and bills to see if you can afford the house payments.

Failing this check means you won’t get a mortgage. Some common reasons include:

• High existing debt levels
• Low or unstable income
• Poor credit history
• High living expenses
• Recent job changes
• Inaccurate or incomplete application information

To improve your chances of passing affordability checks, you can:

• Pay down existing debts
• Ensure a stable and sufficient income
• Improve your credit score
• Reduce living expenses
• Maintain consistent employment
• Provide accurate and complete application information

Most lenders cap lending at 4.5 times your annual income, though some may stretch to 5 or even 6 times in certain circumstances.

Use the mortgage affordability calculator to see the maximum mortgage amount you can afford based on your income.

Job Instability

Lenders prefer borrowers with stable employment histories. Frequent job changes, gaps in employment, or being on probation in a new role can all raise concerns.

To improve your chances:

• Try to stay in your current job for at least 3-6 months before applying
• If self-employed, ensure you have at least two years of accounts
• Explain any employment gaps or changes in your application

Overdrawn Bank Accounts

Regularly going into your overdraft or having bounced direct debits can signal poor money management to lenders. 

They want to see that you can handle your finances responsibly.

To improve your bank account health:

• Avoid using your overdraft in the months leading up to your application
• Set up standing orders to ensure bills are paid on time
• Keep a buffer in your account to avoid accidental overspending

High-Value Debts

Large outstanding debts, such as car loans or substantial credit card balances, can make lenders wary. 

They may see these as a risk to your ability to meet mortgage repayments.

To address high-value debt:

• Create a plan to pay down your largest debts before applying
• Avoid taking on new large debts before or during your application
• Consider consolidating debts to potentially reduce monthly payments

Limited Credit History

While you might think having no debts is a good thing, lenders actually prefer to see a history of responsible credit use. 

A limited credit history can make it harder for lenders to assess your reliability as a borrower.

To build your credit history:

• Open a credit card and use it responsibly, paying off the balance each month
• Ensure you’re on the electoral roll at your current address
• Consider a credit-builder loan or card

Severe Bad Credit History

Your credit history is like your financial report card, and lenders pay close attention to it. 

A poor credit score can be a significant roadblock when applying for a mortgage. 

Defaults, bankruptcies, or County Court Judgments (CCJs) can all negatively impact your creditworthiness.

To improve your chances:

• Wait at least six years from the discharge date before applying
• Check your credit report for errors and dispute any inaccuracies
• Pay bills on time and reduce existing debts
• Consider a credit-building credit card to improve your score

Remember, while a poor credit history can make things trickier, it doesn’t automatically disqualify you. 

Some lenders specialise in bad credit mortgages, though you may face higher interest rates

Other Factors That Could Stop You Getting a Mortgage

While we’ve covered the main obstacles, there are a few other factors that could impact your mortgage application:

• Age restrictions. Many lenders set maximum ages for mortgage borrowers, typically between 75 and 85. If you’re over 70 and want a 20-year mortgage, finding a suitable lender might be difficult.
• Property type. Lenders often avoid non-standard properties like timber or steel-framed homes. Issues such as dampness or Japanese Knotweed can also deter them. Properties at high flood risk may require specialist advice to obtain a mortgage.
• Self-employed without sufficient proof of income. Lenders usually demand 2 or 3 years’ accounts from self-employed applicants to verify income. If you’ve only been self-employed for a year, getting a mortgage might be challenging, although some lenders consider applicants with shorter histories if they meet other criteria.
• Not being on the electoral roll. Not being on the electoral roll can lower your credit score and complicate identity checks. Ensure you’re registered at your current address.
• Too many credit applications. Multiple credit applications within a short period suggest financial instability to lenders. More than five inquiries in six months can raise concerns.
• Payday loans. Frequent payday loan use indicates potential financial difficulties. Lenders often view borrowers with multiple payday loans in the past year as high-risk.
• Recent changes in circumstances. Recent job changes or becoming self-employed might be seen as unstable. Lenders may hesitate if you’re on probation or have recently started self-employment.
• Errors in your mortgage application form. Mistakes on your mortgage application, such as incorrect dates or personal details, can delay or damage your application. Carefully review your form before submission.

Key Takeaways

• Low income, insufficient savings for a deposit, high debts, failing affordability checks, job instability, overdrafts, poor credit history and other factors can all hinder your mortgage application.
• To improve your chances, save for a larger deposit, build a good credit score, register to vote, avoid overdrafts and payday loans, and show a steady income.

The Bottom Line

Many factors can prevent you from getting a mortgage but don’t despair. 

Understanding these challenges is the first step to overcoming them. 

With careful planning, patience, and sometimes professional help, you can increase your chances of mortgage approval. 

Remember, lenders differ, so don’t be discouraged by one rejection. Consider using a mortgage broker to find the right lender for you.

A broker can save you time by comparing deals, access to lenders you might miss, and providing expert advice to help you secure the best mortgage for your needs.

Need a good broker? Get in touch. We’ll connect you with a qualified mortgage broker to help with your mortgage application.