Lenders can reject applicants for various reasons, often because the client is deemed too risky. Some of these reasons include the next:
- Insufficient Income
Having an insufficient income is one of the first reasons why lenders would reject you. In general, applicants can borrow around four times their annual income.
This means if you get paid around £50,000, then your maximum mortgage could be £200,000. So, if you’re applying for anything bigger than that, there’s a big chance it’ll get rejected.
- Poor Credit History
Bankruptcies, missed payments, and delayed payments, are all major red flags for all lenders out there. They show on your credit history and make it difficult for you to get approved for anything.
After all, if you can’t handle your financial responsibilities, how can you handle paying a mortgage?
- High Debt-To-Income Ratio
Sadly, even if you have a good credit score and a good income that can cover your mortgage, there’s a chance you’ll get rejected because of your DTI.
Basically, your DTI ratio is the percentage of income that you pay for your debts and obligations. If the percentage is higher than 40%, you’re liable for rejection.
- Employment Instability
Employment instability doesn’t just mean moving from one job to another. This segment includes frequent job changes, significant gaps in employment history, and unstable income.
These are all signs that your employment status is uncertain and you’re a risky applicant and might not be able to pay the loan.
- Inadequate Deposit