One of the main reasons home buyers use the services of a loan or mortgage broker is because they have been turned down by a bank or building society and are wary of being turned down again.
Rejection could be for a number of reasons, such as a poor credit score or insufficient proof of income, although homebuyers should not fall into the trap of assuming that if one bank or building society rejects them, they automatically fall into what is known as the non conforming or sub prime category.
There is no central credit blacklist held anywhere and each lender uses their own criteria and, indeed, some specialise in lending to borrowers with an impaired credit record.
Popular reasons for having a loan
or mortgage application declined include:
Impaired credit - A history of County Court Judgments (CCJs), loan arrears or defaults, rent arrears, Decrees (in Scotland), bankruptcy or individual voluntary agreements (IVAs) are the usual reasons for an impaired credit history.
No credit history - People who have not previously borrowed and have little or no credit record at all. If you have no credit history, it is difficult for lenders to assess how good you are at repaying.
Electoral roll - Individuals who are not listed on the electoral roll, have had several home addresses in a short space of time, or have lived abroad until recently. Some lenders will instantly reject an application if you are not registered on the electoral roll at your current address.
Uncertain income - Borrowers with an irregular or uncertain income such as the self employed or contract workers, people who have changed jobs frequently, or have a job that relies heavily on commission or bonus income.
One of the fastest-growing areas of mortgage lending is the so-called sub prime market - which are mortgages tailored to individuals who do not conform with standard lending criteria, that is having a history or other circumstances that, from a bank's point of view, are less than ideal.
If a bank thinks you present too great a risk, they will turn you down. If this happens to you, a specialist mortgage broker could help. They will analyse your situation and suggest lenders who are likely to accept your application for borrowing.