Trying to get a mortgage can be a daunting task. However, it’s not as difficult as you might think and there are a number things you can do to improve the odds of you being accepted. To give yourself the best chance of securing a good deal, you’ll need to have your finances in order before you apply.
Every mortgage lender has its own set of criteria for who they will lend to; what makes you attractive to one may not satisfy another. In general, lenders look at the following:
- Employment status and income
- How much you want to borrow
- Any existing debt
- Size of deposit
- Credit rating
What you can do to improve your chances
1. Register to vote
When you register to vote you are added to the electoral roll. Lenders use electoral roll data to run identity checks and make sure you are who you say you are. They will also verify that the address you give them is legitimate and that you’re not laundering money. Even if you meet all the lender’s criteria, if you’re not on the electoral roll you’ll find it very difficult to get a mortgage.
If you are unsure whether you are registered, check with your local council.
2. Check your credit report
The information in your credit report tells lenders whether or not you are financially responsible and if you will be able to pay back what you borrow. It shows any overdrafts, credit cards, loans and mortgages you’ve had in the last six years and may also include any mobile phone contracts you’ve had and some utility accounts.
If you spot any errors in your report, contact the lender(s) associated with the incorrect data who should be able to amend it for you. If they will not correct the information, you can request the Financial Ombudsman to step in and order the necessary changes.
3. Use credit responsibly
When it comes to your credit cards, lenders prefer you to be using less than 50% of your available credit limit. To confuse matters, you could also be penalised for having too much unused credit at your disposal as there’s a risk you could suddenly decide to spend it all and run up huge debts. The best approach is to use credit, but use it wisely. For example, if you have a £5,000 limit, keep your balance below £2,500. If you have a £10,000 limit you don’t use, consider asking the card provider to reduce it.
4. Don’t apply for credit before trying to get a mortgage
Every time you apply for credit, the new provider will search your credit file and this will be recorded on your report. Having lots of searches on your file could make it appear as though you are desperate to borrow money, and this puts lenders off. If you must apply for credit, one application will suffice, as long as you can afford it, but steer clear of payday loan companies.
5. Cancel accounts you no longer use
Old, dormant credit accounts can be viewed as a fraud risk. It’s worth cancelling cards and accounts that you haven’t used in the past 12 months.
By contrast, lenders see long-term, stable credit relationships in a positive light. So, if you’ve had a credit card for a while but recently stopped using it after getting a new one, keep the account open until after you apply for a mortgage – it could be giving your credit score a boost!
6. Pay your bills on time
Did you know that missing just one payment will count against you for at least 12 months? Even worse, it will then be visible on your credit report for the next six years, which could make it extremely difficult for you to get a mortgage.
It may be helpful to set up direct debits for all your accounts to make sure you always pay your bills on time. If you are having problems keeping up with payments, contact the lender before the next one is due; as they can offer help and save you from defaulting.
7. Have your paperwork ready
Lenders will want to see proof of your income before they can offer you a mortgage deal. They may request any or all of the following evidence:
- Three months bank statements
- Three months pay slips and proof of bonuses
- Three years accounts or tax returns (if you are self-employed)
- Proof of deposit (e.g. savings account statement)
- Your latest P60
- Proof of identification (usually a passport)
- Proof of address (e.g. a recent utility bill)
- A gift letter if you’re getting deposit help (to prove it is a gift and not a loan).
Lenders often ask for original bank statements rather than copies, which your local branch should be able to arrange for you. Be aware that it can take a couple of weeks for them to arrive, so plan ahead.
Having all these documents ready in advance will save you time and reduce the number of people who review your application.
8. Provide accurate information on the application form
Take care to complete the application form honestly and accurately. You must declare all your debts and give your precise income; dishonest answers will almost certainly guarantee your application is declined.
9. Add a little to your deposit
The loan-to-value (LTV) rate is the percentage of the value of the property that you can put down as a deposit. For example, if you have £20,000 to put down on a property worth £100,000, the loan-to-value is 80%. As a general rule, the larger the deposit you have, the better the mortgage deals that are available to you – and the greater your chance of being accepted. If you fall just within a higher LTV bracket (e.g. 80%) adding as little as £100 to your deposit could move you into the next bracket and make you more attractive to lenders.
10. If rejected, don’t apply again straight away
If your first application is not successful, don’t apply for another mortgage straight away. More searches on your credit file will harm your chances next time and you could end up making the problem worse. Instead, contact the lender to ask their reasons for rejecting you. If it was down to a problem with your credit file, take steps to tidy it up before making a new application.
Arrange a free consultation to discuss your mortgage needs today. Please contact Sharon Rigden on 01772 431233 or email email@example.com. To request a callback, visit the RfM Mortgage Services website.
RfM Mortgage Services is a trading style of Key Mortgage Advice Limited who is authorised and regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No 312930 at register.fca.org.uk/
Think carefully before securing other debts against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage
The Financial Conduct Authority does not regulate some aspects of commercial mortgages and buy-to-let mortgages.
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Please be assured we treat complaints seriously. For your protection if you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service (‘FOS’). Please see the following link for further details: financial-ombudsman.org.uk/