‘Little’ things can actually be red flags (Image: Chalirmpoj Pimpisarn via Getty Images)
There are numerous factors considered when you apply for a mortgage, with the most significant ones being, unsurprisingly, your income, existing debt levels, credit usage and credit score. However, one mortgage broker has shed light on some of the seemingly minor issues that can cause major headaches during the application process, occasionally derailing a bid even when all the key criteria appear to satisfy a lender’s requirements.
“I’ve lost count of the times a regular mortgage application has been at risk of being derailed because of something perceived to be quite small,” said Ranald Mitchell, director at bad credit mortgage specialists Charwin Mortgages.
He continued: “A lender will sometimes pause for thought, or not give a straight ‘yes’ to a mortgage application for things that many people think are irrelevant, but which actually matter in the eyes of the lender.”
As an example, Ranald highlighted how the use of crude or light-hearted references when transferring money to or from friends has been the source of numerous mortgage complications.
He said: “It’s a bit of fun at the time, but not so much fun if a lender red flags it and sends an application for more manual underwriting. Lenders want to know that the person they’re handing potentially hundreds of thousands of pounds to is serious and bawdy bank references can undermine that. If your friends transfer money to you in this way, have a word with them.”
Ranald Mitchell (Image: Ranald Mitchell/Newspage)
Ranald highlighted another obstacle in what would otherwise be a straightforward mortgage application: individuals applying for credit after their mortgage offer has been secured.
He explained: “People get their mortgage agreed in principle and think, ‘OK, that’s in the bag, I’ll now go out and buy that drone at Curry’s on finance that I’ve held back on for a few months’, or they take out a new credit card to pay for a holiday. They forget that a mortgage offer can be retracted by a lender if they see new developments on a person’s credit profile that make them uneasy right up until the moment of completion.”
Ranald said that frequent gambling and use of cryptocurrency exchanges, even where the sums involved are relatively modest, could also trigger concerns and prompt a lender to reconsider.
He added: “If you’re betting a few times a year, such as on the Cheltenham Gold Cup and the Grand National, a lender will generally wave that on. Millions do it.
“But if you’re regularly using betting sites or sending money to crypto exchanges, that can create a picture of someone who is more likely to be less dependable with their mortgage repayments. Again, it can make the lender think twice.”
Missed payments, even when the provider isn’t actually extending formal credit to you, can also create mortgage difficulties, Ranald warned.
He added: “Take Netflix as an example, or HBO Max if a person likes their sport. If someone’s planning to ditch their sub, they’ll often just cancel the direct debit or not bother transferring the money across, meaning the payment won’t go through.
“If you’re going to cancel a monthly subscription, do it the right way through their website. That way, it won’t appear as a missed or failed payment on your account. Bounced or returned direct debits can create real issues that people just don’t recognise.
“All in all, be alive to the fact that even the small things can impact your mortgageability, right up until the funds are in your account.”
