Worries about not being accepted for a mortgage keeping you awake at night? Here are some top tips to increase your chances of a successful application.
Rein in your spending habits
Being accepted for a mortgage isn’t quite as simple as proving you have a regular income. A mortgage lender will scrutinise all your finances which will include not just any debts you have, but your overall spending too.
For starters, it’s essential that you stay in the black every month, so if you are constantly eating into your overdraft every month, you may want to go through your finances with a fine-tooth comb and work out if there is anywhere you can cut back. Study your bank statements, cancel any old direct debits and perhaps cut back on a few luxuries here and there – at least for a few months before your application. You can always introduce some back once you have your mortgage agreement (as long as you can afford to do so alongside your mortgage payments).
Pay off your debts
You don’t need to be entirely clear of debt to get a mortgage, however if you have a lot of outstanding debt, it may be wise to try and clear as much as possible before applying for a mortgage.
A small amount of debt can be useful to your mortgage application as it will show the lender that you are financially responsible enough to manage credit agreements. However, you must make sure that you meet all your payments on time – and in full. If you have any late or missed payments on your credit report, this will raise a red flag with the lender.
Become familiar with your credit rating
Are you aware of your credit rating? You may not be but you can be certain that any mortgage lender will be familiar with it – and it could be the difference between being accepted for a loan or not. Anyone can have access to their credit report – many providers will allow you to see it for free – so it’s worth checking it out before you even apply for a mortgage to see if there is room for improvement.
First-time buyers often make the mistake of thinking they’ll have a good credit rating as they have no previous debts, but in fact this isn’t always a good thing. Lenders want to see a record of paying back debt responsibly and on time, such as credit cards or mobile phone bills before they agree to lend you a large sum of money.
Go through a mortgage broker
Being turned down for a mortgage isn’t the end of the world, however if you are applying for numerous mortgages and getting turned down, all these applications will show up on your credit rating. A large number of searches in a small space of time will raise alarm bells with mortgage lenders and therefore will make it even more difficult for you to be accepted for a mortgage.
Many people choose to take advice from a broker before applying for a mortgage. The advantage of doing this is taking advantage of the broker’s knowledge of the mortgage market and the application criteria for each lender. Once the broker is aware of your circumstances they should only recommend suitable products to you, meaning you are more likely to be accepted.
Some brokers may charge a fee for their services, whilst others will offer their services free of charge to you as the client; however they will receive commission from the lender. Make sure you choose a broker that you know is regulated by the Financial Conduct Authority (FCA) – this gives you assurance that the broker will only recommend products that are suitable and affordable for you.
The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.