First time buyers still have problems finding a mortgage despite all the hullabaloo from the government and lenders pledging help and support.
The fact is banks and building societies are rebuilding their balance sheets and are not keen to
lend cash – especially in a falling housing market where house values can soon drop below the
mortgage amount.
The latest statistics from the Council of Mortgage Lenders, the industry voice of all the big banks
and building societies, show that just 10,500 first time buyers managed to grab a mortgage in
January – down 28% from December and 13% on January 2010.
The average loan-to-value was 80% – which means a first time buyer needs a cash deposit of at
least 20% of the value of the home they want to buy.
The average income multiple was 3.12 and the proportion of income spent on mortgage interest
repayments was 12.5%.
These figures may seem pointless, but they are not – they are part of the lending profile and if
buyers are outside of these criteria, the likelihood is underwriters will reject your mortgage
application.
The profile includes a credit score that the lender analyses to give prospective borrowers a ‘risk
rating’. If a buyer’s risk rating is too high, the lender will turn down a mortgage application.
Here are the most common risk indicators that lead lenders to reject borrowers:
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No borrowing history – A track record of borrowing and repaying money reassures lenders
that a buyer can manage finances.
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Wrong credit profile – Some lenders target particular customer groups, like high-net worth
customers, the self-employed or young professionals.
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Bad credit in the past – Check out your credit record to see if you have
unexplained ‘adverse’ information like defaults, missed payments or court judgments
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Too many credit applications – Lenders can see credit searches from other lenders and too
many in a short time can discourage them from lending.
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Verifying your address – Credit searches are attached to addresses as well as people. If you
do not turn up on an electoral roll, they suspect you are not telling the whole truth about your
financial affairs
If you are looking for a mortgage, now is a good time to clean up your financial background to ensure your application goes through without a hitch.
