How to get approved for a mortgage
As with any major purchase, it makes sense to do your research. Understanding how mortgages work and the type of mortgage you need is only part of buying a new home.
Knowing how to put together the ideal application gives you the best possible chance of being accepted. The following page should give you a better idea of what’s expected to make your application as seamless as possible.
What do mortgage providers need for an application?
Proof of identity
To prove who you are, you’ll need to show a valid passport, driving licence, council tax bill, bank statements or a utility bill from the previous 3 months.
Age
You can apply for a mortgage from being 18, and some lenders still accept applications by applicants in their late 70s and 80s.
Employment status
Lenders prefer low-risk applicants, so what you do for a living and how you are paid makes a difference. If you can provide regular payslips showing steady earnings, that’s great. However, if you’re self-employed, a contractor, work part-time or have an unusual or irregular job, you’ll have to provide more information to convince lenders you’re a safe option.
Property type
Again, lenders don’t like surprises, so standard bricks and mortar properties cause the least issues. If you’re looking into buying an unusual property, for example, a conversion, a flat linked to a commercial property, a remote property, a fixer-upper, or somewhere with a unique feature like a thatched roof or historic architecture, you may have to seek out a specialist lender.
Credit score
Every mortgage provider will check your credit score, so it’s imperative to have as clean a credit report as possible. Your credit report holds all kinds of information about loans, credit cards, how you pay your bills and manage your finances, so again, it’s essential that it looks as healthy as possible.
Deposit size
Lenders feel safer the more invested their borrowers are, so the larger your deposit, the more likely you’ll be accepted. It will also improve your chances of being offered competitive interest rates. Also, you’ll have to prove how you raised your deposit.
Other factors that affect mortgage eligibility?
How much you expect to borrow
Many buyers shop with their hearts and not with their budgets. Despite the common understanding that mortgages are based on 4 x our salaries, that’s not always the case. An affordability assessment considers your income vs outgoings to calculate what you can comfortably afford.
Your income
There are lenders with minimum salary requirements, but most are open to all earners. So your income isn’t just your salary; it’s all your regular payments. In addition, lenders consider overtime, bonuses, commission, pensions, benefits, and more.
Your expenses and debts
Your income only accounts for half of your budget. The other half is your outgoings, which translates to monthly bills, existing loans, credit cards, insurance, groceries, transport costs, and even holidays and entertainment.
Your spending habits
Any irregular spending habits will show in your bank statement where your budget fluctuates. Anything lenders can’t easily interpret will raise a red flag with your acceptance chances.
Any dependents
Of course, the more mouths you have to feed, clothe, and home, the more outgoings you’ll have.
Whether you can afford to pay a mortgage
Only with an accurate picture of your financial circumstances can a lender decide whether they believe you can afford a mortgage and how much. To calculate an exact figure, they’ll carry out an affordability assessment from the information you provide.
What you need to know about your affordability assessment
You’re expected to complete an affordability assessment with every mortgage application. We’ve outlined many items that constitute your financial health and spending practices, including allowances, subscriptions, clubs, fees, additional incomes, and other similar elements.
Calculating what you’re likely to have left at the end of each month determines how much lenders think you can comfortably afford while living an acceptable quality of life, and that’s the maximum amount they’re likely to lend.
Mortgage pre-approval – getting an ‘agreement in principle’
Many lenders will provide an agreement in principle using the details you must prove in your formal mortgage application, so it’s not worth hiding anything to try and boost your figures. You’ll only come unstuck further into the process, wasting everyone's time and lowering your chances of being accepted.
How to improve your chances of mortgage approval
Save as much money as possible for your deposit
The more money you save for your deposit, the better your chances of acceptance and favourable interest rates.
Get your credit score as high as possible
Credit reports play a vital part in mortgage applications. The higher your score, the more reputable you look and the better your chances. So, wherever possible, balance your credit cards, pay off your loans, get out of your overdraft, and ensure you’re up to date with all utilities, bills, and subscriptions.
If you have a poor credit report, however, don’t panic. There are specialist lenders who work with people just like you. Getting a mortgage is rarely impossible, but sometimes it takes a little extra work.
Register to vote
It might not seem like a big deal, but this is a game-changer. The electoral roll is used by lenders to make identity checks and is part of your credit report. So if you’re not on the electoral roll, fix it right away. If you can’t, add a note of correction to your credit file showing alternative proof of your address and ID.
Maximise your available credit amount
Lenders allocate a percentage of your income to usual household debts and prefer that you use less than 50% of it. Better still, using around 25% boosts your chances of acceptance. Paying off old loans and balancing credit cards lowers your limit.
Pay your bills on time every time
Paying your bills on time makes you look financially responsible. A default on your credit report is a red flag and could come from something you believe is as unimportant as a missed mobile phone or utility bill. Setting up direct debits for your bills makes you more attractive to lenders.
Stop applying for any other forms of credit
New credit accounts—even store cards and catalogue schemes—add to your available credit limit, so until you land your mortgage, stop applying for anything that looks like credit.
Also, every time you apply for credit—whether a phone contract, utility account, or payday loan—a hard check is made on your credit file, even if you don’t take the credit—too many hard checks lower credit scores.
Cut back on spending
Lenders expect to see around 6 months of bank statements, so any unusual or excessive spending will be hard to hide. As soon as you think you might be interested in a mortgage, tighten your belt and start living as frugally as possible. This will deliver a better forecast of what’s left at the end of each month and that you can cope with any interest hikes or unexpected costs.
Stop using your overdraft
Living in your overdraft makes lenders think you consistently teeter on the edge of your finances, which is the last thing they associate with low-risk applicants.
Have your paperwork ready
You want the process to be as smooth as possible, so having your paperwork ready in advance is one way you can help.
- 3 to 6 months of bank statements and payslips
- Proof of additional income – bonuses, commissions, pensions, dividends, etc.
- Your P60 tax form
- 3 years of accounts or tax returns if you’re self-employed, freelance, or have an irregular income
- Proof of identity/address
- Proof of deposit and how you raised the money
Don’t be the one to hold things up
When asked to provide information, complete a form, or do anything else, do it as soon as possible. Being accepted for a mortgage can be a quick and painless process, but the more hold-ups encountered along the way, the longer it takes.
Fill out your application correctly and truthfully
Inaccurate or misleading information in the paperwork creates delays, whether added by accident or on purpose. If you’re unsure about filling in the forms, ask a mortgage broker or other professional for help.
- Be honest
- State your exact income
- Provide your full name and address, and address history from the previous 3 years
- Declare all debts and outgoings
- Don’t hide anything you think will affect your application
Apply for a mortgage in principle
A mortgage in principle gives you a clear idea of how much you’ll likely achieve and is good practice for your formal application. Even though it isn’t a definite offer, it’s still a good indicator of where you stand, flagging any issues.
Only apply for your preferred mortgage
Every mortgage application creates a hard check on your credit report. But, as we said, too many will lower your credit score and reduces your chances of being accepted.
What to do if you have your mortgage application rejected
Don’t write it off and apply to a different lender; they’ll likely reject you too. Instead, look into why you’ve been rejected and fix the problem. It could be anything from a low credit score to a mistake in your form, so find it and fix it. If you’re unsure why you’ve been rejected, ask a professional for advice.
To boost your chances of mortgage acceptance, consult a mortgage broker
Not only do mortgage brokers have access to providers and products you won’t find on the high street, but they’ll also help you complete your paperwork, make the application, and advise you on the best ways to guarantee being accepted.
Why not call CLS today to see how much easier getting a mortgage is with their team of experts fighting your corner?
