Home buyers trying to complete their house purchase before a crucial deadline are at risk of making a mistake on their mortgage application, which could cost them thousands of pounds.
A flutter on the National Lottery or even the weekly pizza could affect a borrower's paperwork, an expert has explained.
On April 1, new Stamp Duty Land Tax (SDLT or Stamp Duty) rates will take effect and it will impact first-time buyers the most.
First time buyers will go from paying no stamp duty when buying a home worth ￡425,000 or under, to paying the tax when buying a property worth more than ￡300,000.
Non-first-time buyers will see the amount of stamp duty payable on a ￡500,000 property increase from ￡12,500 to ￡15,000 after the deadline, a cost of ￡2,500.
With just under a month to go, one of the main sticking points can be the mortgage application itself.
Jonathan Bone, head of mortgages at Better.co.uk, said a survey carried out by Which? on 3,500 people aged between 18 and 69 revealed that four in 10 (41%) of 18 to 24-year-olds have had a mortgage application rejected, before going on to successfully buy their first home.
He said anyone applying for a mortgage needed to bear in mind eight crucial rules.
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1. Don't joke about money
Bone said: "We’ve all been in that situation where we have to transfer a friend or family member money that you owe them. Whether that is for a pizza at the end of a cosy evening in or a larger amount of money, it's important to think about the reference you give for the transaction. While you might think it would be funny to make an inappropriate joke as to what the person is receiving money for, it can actually lead to your mortgage application being rejected by lenders.
"As part of a mortgage application process, you usually have to provide three months worth of bank statements for the lender to review, so if you have ‘questionable’ spending on these, an application may automatically be declined with no option to appeal."
2. Beware of small betting or gambling transactions
That lottery ticket you regularly purchase could put a damper on your application, according to Bone. He said: "While buying a lottery ticket every so often is unlikely to see your application rejected completely, it's important to be careful about making gambling bets regularly.
"A lender will take each gambling transaction into account, so if it is causing problems with your finances (such as habitual spending), it may raise concern that you are unreliable at making repayments.
3. Getting a new job, even if it pays more
Getting a new job can be something to celebrate, but if it happens during your mortgage application process, then it can cause problems in terms of getting accepted.
Mr Bone said: "Most lenders want proof that you have been working in a job that has provided you with a stable income for a while.
"While a higher income might seem like a good thing and improve your affordability, someone who is still in their probationary period at work may seem riskier to some lenders—it completely depends on certain lenders acceptance criteria."
4. Being self-employed but not having enough paperwork
It can be hard to prove your income stability to a lender as a self-employed, as you don’t get regular payslips like you would from an employer.
Bone said: "It doesn’t mean you can’t get a mortgage if you are self-employed; you just need to be able to provide proof of a stable income.
To do this, make sure you have evidence of regular money coming in that will prove you can make repayments on time, as well as any taxes that you have paid."
Ideally, if you can provide this over a two-year period or more, a lender can get a better idea of how your salary fluctuates month to month and whether you are a risk to them or not.
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5. Not being on the electoral roll
Lenders often use the electoral roll to ensure that the address that you provided matches official records so they can verify that it is correct.
Not only that, but not being part of the electoral roll can also lower your credit score, which lenders can perceive as a risk.
If you aren’t part of the electoral roll and are planning on applying for a mortgage, make sure to do so as soon as possible.
6. Admin errors
A completely avoidable reason why some mortgage applications get rejected can be something as simple as making admin errors when filling out paperwork.
This could consist of something like filling out your address wrong or making spelling errors. It is, therefore, important that when you are filling out your mortgage application, you take your time and double-check that everything has been completed correctly before submitting any forms to the lender.
7. Applying for too much credit at once
If you are planning on taking out a mortgage, make sure you consider how many credit applications you are making at once, such as a loan on a car or applying for a credit card.
Taking out lots of loans at once can flag you as a problem to a lender and may make them question whether you will be able to make repayments on time.
8. Not having a paper trail of your deposit
Finally, another reason you may be rejected for a mortgage application is not having a paper trail for your deposit.
For example, if you received money as a gift, you have to be able to prove where this money has come from, so make sure you have a paper trail showing the money leaving and entering accounts, so the lender can follow it to your accounts.
Failing to have this can cause delays in your application, and if you can’t prove where the money came from, it may not be able to be included in your application.