How to Prepare for a
mortgage application
Preparation
is key!
When you decide to buy a house getting a mortgage can be
complicated and frustrating! With so many mortgage options and
lenders available and your individual circumstances it can be difficult.
You will want to make yourself as attractive to lenders as possible,
not only to secure the mortgage of you choice but to get the best
deal, which can mean saving hundreds of pounds.
Take a look at our top tips for increasing your chances of being
successful when you apply.
Every lenders criteria will be different, for some people who are for
example self-employed or have a bad credit history getting the right
mortgage can be more complicated.
Doing some simple checks and getting your information/paperwork
together prior to making your application, should increase your
chances of success.
Always double check you have filled in the forms correctly and have
all the required paperwork for your application – sounds simple but
things can easily get missed.
Check your
credit report
Mortgage lenders will take a look at your credit report to check if
you have the financial discipline needed to make your mortgage
payments.
Credit reports list details from accounts you have had open in the
last size years including credit cards, loans, some utilities, overdrafts
and mortgages.
It is worth checking your status with the three main credit reference
agencies in the UK, TransUnion, Equifax and Experian.
I have a bad
credit
history
Having a poor credit history might not rule out your chances of
getting a mortgage. If you can try to improve your record before you
apply for your mortgage or take advice from an independent
mortgage broker about your individual circumstances. They should
be able to advise on what you can do to improve your score and
which lenders may look more favourable at your application.
Correct any
credit score
errors
Sometimes the information on your credit file may be incorrect, if it
is you have the right to have the error correct. If there is an issue
contact the lender and discuss the error.
If the lender will not correct the error you can complain to the
Ombudsman or write to the three credit reference agencies and ask
them to add a notice of correction to your file.
Deposits &
Better rates
Mortgage rates typically get cheaper if the loan-to-value is better.
So, if your deposit is nearing a border, investigate if you pay a little
more deposit what the interest rate would be. If you can add a little
more money to your deposit even £100 further beyond your LTV
band this again can increase your chances of acceptance.
Are you on
the
electoral
roll?
It can be very difficult to arrange a mortgage if you are not on the
electoral roll, lenders use this data to perform identity checks. This is
to check that the information you are providing is correct.
If you are not on the electoral roll contact your local council or you
can register online for the electoral roll.
Manage your
existing
credit
Lenders have different views on the amount of credit you have
available and there is no exact science to this.
Try not to have excessive credit limits on cards or overdrafts and
ideally use around 25% of the available credit.
If you can pay off debit, do so.
New credit
Avoid applying for new credit in the months leading up to getting a
mortgage.
Lenders will search you credit file every time you apply for a loan,
overdraft, credit card, mobile phone or utility contracts. The more
searches you have in a short time the less likely you are to be
granted credit.
If you do need to apply for credit it is unlikely that one application
will damage your application too much, so long as it is affordable.
However payday loads can be detrimental.
Pay your
bills
Always ensure that you pay your bills on time, missed payments
will count against you on your credit file.
A missed payment can count against you for at least a year and they
stay on file for six years.
Payments for rent, mortgages, utilities and mobiles etc are all tracked.
Overdrafts
Stay out of your overdraft, especially during the months up to your
mortgage application. Some lenders will not accept your application
if you have used your overdraft at all in the three month they
check..
Manage your
spending
Before you apply for a mortgage take a look at your spending.
Lenders often want to see bank statements, usually around 3 months
of statements. This is to check that your income matches what you
have declared and if interest rates were to rise you would still be
able to afford the payments.
Cutting back on unnecessary purchases in these three months will
not only help towards the costs of buying but will also make your
application appear more favourable.
Good luck with your mortgage application.
If you do get rejected by your lender, then stop, they should indicate
why you were turned down. Make sure you correct the problem
before applying with another lender.
Speak to a specialist, independent mortgage broker for advice and
help.