There’s little in life more stressful than applying for a mortgage. Your finances under the microscope, the questions probing and the outcome uncertain, this is a daunting task indeed.
For those preparing to take the plunge and make a move in the property sales market, however, there are certain steps that can be taken to ease the pain that mortgage applications so often inflict, making the whole thing run just that little bit smoother.
Get everything in order, organise accounts and consider existing credit agreements and there’s no question that, when the time comes to approach a mortgage lender, your chances will be improved. Your dream house on the line, it’s well worth doing a little leg work at this stage.
Consider our top tips and discover how to improve YOUR mortgage chances.
Check your credit report
Your lender will check credit reports during the decision-making process, so get ahead of the curve. Listing credit cards and overdrafts, loans, bills, mortgages and more, your credit report will determine whether or not you’re considered a risk and go a long way to influencing that all-important outcome.
Register to vote
This is an absolute must. Your credit rating might pass muster, but if you’re not on the electoral roll, your mortgage application is almost certain to fail. Check with the local authority. If you’re not on the electoral register, you should be able to be added within a month or so.
Manage available credit
Got credit cards and overdrafts? Calculate the difference between your debit balances and credit limits. Find a balance between not having too much credit and not getting too close to your limits, both of which make lenders anxious. If you do have debts, try to ensure they’re less than 50% of your available credit. If you can clear them, even better.
Close inactive accounts
Many people have old accounts that are no longer being used. You might think this is harmless enough, but closing inactive accounts and getting financial affairs up-to-date and in order can be beneficial. Ensuring all is organised reduces the risk of fraud and, mortgage application or not, represents sound financial practice.
Avoid applying for credit just before your mortgage application
Credit applications made in the three-month period prior to submitting a mortgage application can damage your chances.
Lenders will search your credit file during their investigations. Those who have sought borrowing on other fronts can be considered in a negative light when it comes to making the final decision. Certain applications will be seen more favourably than others. Payday loans should always be avoided as these are sure to raise a red flag.
Pay your bills on time
This one speaks for itself. Bills should always be paid on time – and the impact of failing to do so must not be underestimated. Missed payments will be noted on your credit file – available to mortgage lenders – so set up direct debits and ensure all is in order. Remember, this could be the difference between getting a mortgage and not.
Avoid using your overdraft
Having an overdraft is useful, there is no question. But using it can be seen as evidence that you’re living life at your financial limits and such things don’t sit well with mortgage lenders. Don’t use your overdraft during the three-month period prior to making your application if possible. If you’re unable to do so, getting a mortgage might not be the best idea.
Increase your deposit slightly
Increasing your deposit can increase your chances, so dig deep if this is an option. If you can manage more than the minimum, do so. It can make your application more attractive. Mortgages have a maximum loan-to-value (LTV) amount. If you’re able to borrow beneath this – even if it’s just £100 – you can improve your chances.
Cut your outgoings down prior to applying
Be prepared for your spending habits to come under scrutiny, with lenders keen to see bank statements and assess outgoings. Think about tightening your belt, living within your means and keeping costs to a minimum during the three-month period prior to making your application. Some short-term pain could lead to long-term gain – especially if you can prove to your lender that you’re a suitable applicant.
Check for any financial links to others
This one is often overlooked, but if you have financial links to another person, their activities can influence your chances. Think about past joint bank accounts, mortgages and loans. Even if you’re no longer associated with that person – an ex-partner, for instance – you’re still at risk from their behaviour. This one can seem complicated to tackle, but our advice is to contact credit agencies and ask for a notice of disassociation.