Getting your first mortgage is a ‘coming of age’ moment in your life. You’ve made it all the way through education, you’ve probably bought your first car, and you’ll likely have one or two serious relationships under your belt. There are only really two major milestones that come after that point for most people – having a child and buying a home.
Your Credit Rating Is Poor
Financial mistakes you’ve made in the past will haunt you. Even if you’ve now completely recovered and you’re earning far more than you spend, a defaulted credit agreement from years ago can still prevent you from gaining acceptance on a mortgage application. Lenders now use algorithms more than they use human eyes to make lending decisions, and those algorithms are not your friend if you’ve had financial difficulties in the past.
When you boil down the mortgage lending process, it comes down to trust. The lender is giving you a significant amount of money – often more than six figures – and trusting you to pay it back over many years. That’s a gamble, and lenders don’t like to gamble. Your credit report is their form guide as to how good a bet you are. Consider the types of gamble available in the real world. At the high-risk end of the scale are mobile slots, where the chances of a win are unpredictable. At the low end are sports bets where one team is a clear favorite. If you look more like a mobile slots game on a website such as Late Casino than a sports bet to your lender, they won’t take you on. Mobile slots are exciting, but you don’t go into them, expecting to walk away with a profit.
The best thing you can do about poor credit history is to repair it as quickly as possible. Pay down or pay off old debts. Take out a new credit card, and pay it back in full and on time every month. Your credit status will gradually improve.
Your Employment History Is Inconsistent
When you’re applying for a new job, you probably spend time making sure that your resume looks watertight. Employers hate resumes that make it appear that a candidate doesn’t settle into positions. Having gaps can completely ruin your chances of landing the role that you want. They can also ruin your chances of buying the house that you want, too. Even if you don’t have gaps, changing jobs too frequently can be a red flag to potential lenders.
There’s a reason why a lender will ask for between two and five years of your employment history when they consider a mortgage application from you. They want to see how solid and dependable your income is. You’ll only be able to repay them the money that you owe if you have a consistent income. If you’re often out of work, or you change jobs regularly, there’s no way they can classify that income as consistent.
Your best bet to solve this problem is just to stick at a job for between six months and a year, even if you hate it. It will look better on your application. As a loose rule, the fewer recent different roles that appear on your application when the lender receives it, the better.
Your Income Is Commission-Based
You might be the greatest salesperson who ever walked the face of the Earth. You know how good you are, and you know that every month, you’re guaranteed to get at least 50% more than your basic salary in the form of commission. The problem you face when it comes to mortgage lenders is that they don’t know how good you are, and they’re not going to take your word for it.
Some lenders won’t factor in any commission earnings into their calculations at all. Others will only count a percentage of it. Another common approach is to assess your level of income over a period of several months, to take into account how much your commission earnings vary by. It’s no use if you know that you’re always guaranteed a big month in June – if you’re applying for your mortgage in May and you’ve had a lean February, March, and April, then you’re not going to be able to provide adequate proof of your true earnings.
Getting around this can be difficult. Obviously, if you earn great commission where you are, you’re not going to want to leave and take on a role with a regular, stable salary elsewhere. You should limit your mortgage search only to those lenders who will consider commission when they’re weighing up your earnings. Timing is also important; the best time to apply is when you’ve had a few particularly strong months, or when your earnings have been at around the same level for an extended period of time. Stability is key. The commission is never guaranteed, but if you can at least demonstrate that you’re earning it consistently, you’ll have a better chance.
Ultimately, if you’re struggling to locate a mortgage, your best option is to make contact with a qualified professional. They will likely have access to lenders and deals that you’re unable to obtain on your own, and therefore provide you with better access to the market.