Any veteran property owner who’s been through the process of applying for a mortgage in the last few years will tell you that there are a lot more hoops to jump through these days than there used to be before 2008.
Although lenders have become more competitive in the recent past, the days of being almost guaranteed to have a mortgage application accepted are long over.
Affordability is now paramount and more stringent lending criteria mean that although mortgage approvals are currently at their highest levels in four years, you won’t get the loan you want if you don’t meet the lender’s criteria.
So, what do you need to do to give yourself the best chance of securing the finance you need to buy your dream home?
Manage your money well
In the end, mortgage lenders want to be confident you’re going to be able to pay for your loan, so being able to demonstrate you can manage your money well and budget properly should always be your aim.
Some of the key questions you’ll need to answer will be about your income and expenditure.
It’s wise to repay any existing debt if you can – especially ‘expensive’ debt like credit cards where the interest you’re paying may be greater than the actual capital loan element of your monthly repayment.
Paying off bank loans, HP agreements and overdrafts is also a smart move if you’re in a position to do so – but if you’re not, then consider moving your outstanding liabilities to a cheaper loan facility. For example, a 0% interest balance transfer to a new credit card will reduce your monthly repayments.
If you can show you have no outstanding liability and you’ve shown you have the responsibility to honour previous debt, a prospective lender is likely to have more confidence in you as a customer.
Secondly, you should be aware that a lender will take a close look at your monthly outgoings and your typical expenses. You shouldn’t lie about these, but if you can cut a few costs – such as the bi-weekly takeaway or the massive slap-up payday meal – you’ll seem more responsible.
Similarly, cut costs from your budget where you can. If you can live without the satellite TV subscription for a while and offload any other luxuries temporarily it will have an exponential benefit on your monthly outgoings.
Be realistic about your financial ambitions
In most cases, people are turned down for a mortgage because they can’t afford the loan they’re trying to take.
You might want the five-bedroom house near the park, but the four-bed in a less popular part of town may be closer to your budget.
A broad rule of thumb is to look at the repayments for the loan you want. If they’re going to make up more than 35% of your monthly income, then it may be you’re trying to stretch yourself too far.
Our online mortgage calculator can help you to identify what might be affordable in your case.
Check your credit score
This is one of the many checks your lender will carry out, so it’s wise to make sure you know what they’re going to find. Your credit history will tell lenders what debt you currently have and how reliable you have been at meeting your repayments.
Checking your credit score is free (though you may have to pay if you want a detailed report) and there are a number of companies that can provide you with yours. Experian is the major source of credit information in the UK.
Show you’re a good bet for debt
It may be counter intuitive, but if you’ve never had any credit or debt, lenders are likely to be more cautious about approving a mortgage. This isn’t a reflection of you as an individual, but is down to the simple fact that if you’ve never had any debt, you won’t be able to prove you are responsible about it.
So while we certainly wouldn’t recommend you running up huge bills, if you’re new to credit then it might be worth considering taking opening a credit card account with a low credit limit and paying for the odd thing here and there – always remembering to pay off the balance each month.
If you’re looking to move house this year and want advice on how you can put yourself in the best possible position to be accepted for a mortgage, come and speak to a member of our friendly team.
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.