Taking out a mortgage, whatever your stage of life, is likely to be the biggest financial commitment you’ll make, so you’ll want to find the best deal you can and to make sure that you stand the best chance of getting accepted. There are actually several things you can make sure you’ve done before applying, each of which will help to improve your chances of getting your mortgage application accepted – here’s our Top 10 list for you!
1. Know your credit score and fix it if it’s low
Before applying for a mortgage, get a copy of your credit report – there are multiple free credit score agencies now and they all offer advice and guidance that’s personal to you on how you can improve your score. Follow their steps and watch your credit score improve. One key thing which raises your credit score is being on the electoral roll, so make sure you check that as a priority.
2. Know your budget, and stick to it
Sit down and work out your budget before applying for a mortgage. You will need to be sure you can borrow enough to cover the purchase of the property and that you’ll have enough spare to cover all the associated costs and fees.
Monthly mortgage repayments will depend on how much you want to borrow (and over how long) and the interest rate charged – lenders will be looking closely at your income and outgoings to be sure you can afford the loan and you should know in advance what your own borrowing limits are too.
3. Employment History is important
Some lenders will want to see that you’ve been with your employer for a decent length of time before they’ll give you a mortgage, so if you have plans to change jobs, then factor this in to your planning. There are some that will accept just one months payslip, but having 3 or more from the same role, will open up the amount of lenders that your broker can look at.
4. Try to reduce debt as much as possible prior to your application
If you’re submitting a mortgage application, the last thing any prospective lender is going to want to see is that you owe a lot of money on credit cards or that you’ve got outstanding loans.
Before you apply for a mortgage, try to reduce any debts you have – this will help demonstrate that you manage your money responsibly, and will mean any mortgage application you make is more likely to succeed. It will also mean you will potentially be able to borrow more when it comes to a lender’s affordability calculations.
5. You’ll need proof of income
Mortgage lenders will want to see proof of how much you earn, so you’ll probably need to supply three months’ worth of bank statements and payslips so the lender can look at both how much you have coming in as well as your outgoings. You may also need a P60 form which you get every year from your employer and shows a summary of your pay and how much tax has been deducted. It will save a lot of time on your application if you have all of these things ready to go from the outset.
6. If you’re self-employed, you’ll need at least 1 year’s trading accounts
Getting a mortgage when you’re self-employed can be more difficult than if you’re employed, especially if you’ve only recently decided to go it alone.
Lenders want proof that you’ll be able to keep up repayments, so they’ll usually ask to see an SA302 form relating to the last one to four years from HMRC or your full accounts for the last one to four years. Your mortgage adviser will know which lenders to approach, depending on the history you have.
7. The bigger the deposit the better
The more you can save up to put down as a deposit, the bigger the choice of mortgages that will be available to you. Lenders reserve their best rates for those with a larger deposit amount, in comparison to the loan i.e. a better loan to value (LTV). so you’ll also benefit from lower monthly payments because you’ll have qualified for a better deal.
8. Joint mortgage applications
Buying your first house with your partners is a really exciting time. The mortgage application process isn’t harder, you just have to have two of everything. You both need to make sure you’ve followed the steps in this guide, particularly paying attention to your individual credit score and proof of income.
9. You shouldn’t chop and change your application
Once you’ve started your mortgage application, don’t mess around with it and start changing figures as it could hold up your property purchase. So make sure your sums and information are all correct from the beginning – you will look more organised and convincing to the lender.
10. Find the right mortgage broker
Applying for a mortgage without getting the help of a broker isn’t a good idea. Brokers know the lenders and have access to the most up-to-date information on offers and deals. If you go to an independent mortgage advisor, they’re only interested in finding you the best possible deal. Make sure you don’t choose a broker affiliated to one or two lenders, as they’ll only be able to offer you products from those lenders and you may miss out on a better deal available in the wider market place.