7 Ways to improve your chances of getting a mortgage
When it comes to getting a mortgage, everyone wants a great deal.
We want to help you avoid any stumbling blocks by suggesting easy things you can do to make the process run as smoothly as possible, whether that’s looking at your credit history, saving up for a deposit or dealing with the various mortgage fees you’ll be expected to pay.
1. Go through your credit history
Mortgage providers perform various background checks when you apply for a mortgage and they calculate a credit score based on your credit history. If your credit history is poor, your application will automatically be rejected, so, it pays to take some time out to check yours is the best it can be.
You can view your credit history for free on the Equifax, Experian and ClearScore websites. It’s advisable to check all three credit reference agencies if you can, as the information each holds on you can be different and you won’t know which your mortgage provider will use. You need to look for any mistakes on your records and talk to the credit agency about correcting them.
Your records will show any financial products you currently have and how much credit you have available. If you’ve got credit cards showing that you no longer use, now is the time to close them down, as this could impact on how much your mortgage provider is willing to let you borrow.
If you have missed any payments in the past this will be flagged up on your credit history, as they stay on your record for seven years, but you can add notes to your records briefly explaining what caused them if you wish (e.g. I was made redundant, I had a period of ill health and had to stop working temporarily).
If your credit rating isn’t as high as you expected, it could be that you’re financially linked to someone and their bad credit history is affecting yours. You can be linked to anyone you’ve shared a financial product with in the past, for instance a former housemate because you shared a utility bill or a former partner you rented with. To sort this out, you can apply for a notice of disassociation by contacting the credit reference agencies.
2. Have a sizeable deposit and enough for additional mortgage fees
The more savings you have the better, as you’ll be able to put down a good deposit and have money to pay for the various mortgage fees and charges associated with the process. The larger your deposit, the less of a risk for the mortgage provider as the loan-to-value (LTV) is lower.
Loan-to-value is the value of a mortgage that has been paid off compared to the total amount lent to cove the value of the property. For instance, if a property is worth £200,000 and you borrowed £190,000, the LTV ratio would be 95%.
3. Register to vote
Not being on the electoral register makes it harder to get a mortgage, so you should register to vote immediately.
4. Don’t apply for other forms of credit
In the six months or so before you’re going to be applying for a mortgage, it’s best to not get any other form of credit, be it a car loan, credit card, mobile phone contract or personal loan. This will show on your credit history and you don’t want to look like you’re desperate for credit.
(It’s worth noting that it’s not possible to use any form of credit to pay your deposit. If you attempt to do this your mortgage provider may decline your application, even in the later stages.)
5. Cut your spending and pay off your debts
When you apply for a mortgage, the mortgage provider will usually look at your three latest bank statements as part of their affordability checks. For this reason, try to reduce your spending as much as you can in the run up to applying, and stay out of your overdraft, although you should be realistic – remember they will assess how much you can borrow based on what they think you can afford. If you have debts, you should be doing all you can to pay them off.
It’s much better to hold off applying for a mortgage until this is done, or you’ve reduced your debts substantially. Mortgage providers want to be able to see that you’re good at managing money, so every bill needs to be paid on time, even if it’s for a minuscule amount. Making just the minimum payment each month on a bill is a big no-no and would concern most mortgage providers.
6. Don’t change jobs
If you’re thinking of leaving your current employment, try not to do this until you’ve got your mortgage and moved into your new property.
If you change jobs and are on a probationary period, then this will count against you and you may struggle to find a provider willing to give you a mortgage.
7. Take your time
When it comes to filling out the mortgage application and paperwork, you can’t rush. Everything needs to be done properly, as mistakes can cause delays. For instance, when it asks for your income, you need to state the exact amount, you can’t round it up or guess. You need to be honest about your finances, don’t try to hide debts or pretend that you don’t pay for childcare if you do. A mortgage broker/advisor can help you complete your application and check that everything is correct or you can do it yourself.
If a mortgage provider rejects your application, you can still apply elsewhere, but don’t make numerous applications at once as this will show on your credit history and won’t be looked on favourably by mortgage providers.
This guide to saving for a mortgage was produced in collaboration with L&C, the UK’s leading fee-free mortgage experts.