How to improve your chances of getting a mortgage
Buying a home is likely the largest investment you will ever make. As for most people, you will need a mortgage to help you in buying your home.
There are many factors that need to be considered that could affect your ability to get the mortgage you want, and with that, there are plenty of things you can do to make yourself more attractive to mortgage lenders, ensuring the best possible chances of having your mortgage application accepted.
Speaking to an advisor
Multiple mortgage applications and declines will reflect badly on your credit score. A mortgage advisor will be able to explore the mortgage market and find a lender for you with minimal effect on your credit score. An expert mortgage broker – like CLS – can guide you through the ways to improve your chances and find you the ideal lender for your situation.
Saving for a larger deposit
Although many mortgage lenders will accept 5% deposits, you can improve your chances by increasing your deposit. This will also provide you with access to more mortgage products.
Improving your credit report
Every mortgage lender will check your credit file before authorising a loan. It's a big part of getting a mortgage, so anything you can do to improve your credit report will help considerably. You can't always change your credit history, but you can lower the amount you currently borrow, minimising your total borrowing amount.
With so much of your mortgage application dependent on your credit file, making sure all the information it covers is correct and that it paints a healthy picture of how you currently manage your finances will help you achieve the mortgage deals you want and at the best possible interest rates and monthly repayments.
Paying off debts
It is not always possible for you to clear all of your unsecured debts, but when it comes to mortgages, the less debt you have to start with, the more you will be able to borrow. As we said, it's one of the simplest ways to improve your credit report. Is there any way you could pay off your car loan using your savings account? Could you catch up with your utility bills or rental payments where you've fallen a little behind?
Don't make any new credit applications
Every prospective lender wants to see that you're on top of your finances, so minimising existing credit is a must. How much credit you currently have is a key metric of your credit rating.
Not only should you try and pay off any existing debt, loans, store cards, or credit cards, but it's also essential not to take out any new ones. Your credit report shows all of your applications and whether they're accepted or rejected. Each of these actions affects your credit rating and, in turn, your mortgage application.
Cutting any financial links
A poor financial history can make or break a mortgage application, so being linked to someone with a low credit score could reflect badly on you, for example, holding a joint bank account with an ex-partner. You can write to the credit agencies and ask for a notice of 'disassociation' to prevent this. Removing a low scoring partner from your report will go a long way to improving your scores, especially if they have County Court Judgements, a DMP, or IVA.
Having the correct paperwork
All lenders will check your income is what you say it is. For self-employed, this means all accounts and records must be up to date and for employed, any bonuses and overtime must be accounted for. You'll be expected to provide financial statements, pay slips, and any other proof of income and outgoings they ask for.
Closing inactive accounts
It may be worth closing if you’re not using an account. An open account could be at risk of fraud and may also display out-of-date details.
Reducing your outgoings
Avoid big splurges before applying for a mortgage, as lenders will want to see at least 3 months of bank statements. Those new shoes you have your eye on can wait until after you complete. Also, be conscious that regular cash withdrawals can also raise questions with lenders as there is no proof as to where this money is being spent.