Tips To Improve Your Chances
Top 10 tips for getting your mortgage application approved quickly
1. Organise your deposit money
The availability of 95% mortgage deals has reduced significantly, but some banks are still offering them.
So, you will need a minimum of a 5% deposit, but ideally 10% to give yourself more choice and have access to better rates.
And don’t forget that you will need to pay other costs as well, ie solicitors’ fees, surveyors’ fees. Etc.
2. Improve your credit score
Most lenders use a “credit score” assessment as part of their decision-making process, and having a good credit score is really important. You can improve your score with these few simple measures:
1. Check that you are on the electoral register at your current address. If the lender can’t trace you at your current address, your application could be refused.
2. Make sure that your documents, (driver’s licence, bank statements, credit card statements) are all registered to your current address.
3. If you have a credit card or store card, start paying it by monthly by Direct Debit rather than when the bill arrives. This will ensure that you never miss a payment by accident and your score will improve
4. Avoid using an overdraft facility. Generally, banks don’t like customers who regularly use an overdraft facility as it suggests that you’re not in control of your spending. Switch any additional spending over to a credit card rather than risk going overdrawn.
5. Try to avoid building up multiple credit searches against yourself in the run up to applying for a mortgage. Whilst using comparison sites can be a great tool to find cheap loans or car insurance, shopping around can lead to multiple searches being carried out against you. The more searches you incur, the faster your credit score falls
6. If you have several credit cards, but don’t really use them, close the ones you don’t use regularly. Most people only need one card.
Finally, whilst your credit score is important, it’s only part of how lenders assess your overall financial profile. Some lenders don’t use credit score at all and prefer to take an individual “human” approach – so even if you have a low or even poor credit score, we may still be able to help.
You can get a copy of your credit file and credit score from agencies such as Experian or Equifax.
When you apply for a mortgage you will need to provide evidence of who you are, where you live , what your income is and where your deposit will come from.
• Check that your ID document (passport or drivers licence) hasn’t expired, and that it is registered to your current address.
• If your employer provides paper payslips rather than electronic ones, make sure you keep them all. You will usually have to provide evidence of your latest three months’ payslips – but if you are a contractor or are on a temporary or zero hours contract you may need to provide up to twelve months’ consecutive payslips.
• If you are self-employed, or a director with more than a 20% shareholding in your business, the lenders will ask for your latest two years’ “tax calculations” – previously known as SA302’s – together with copies of your last two years’ HMRC “Tax Overviews”. Without these documents it’s unlikely you will get a high street mortgage. There are however some specialist banks that may consider one years’ documents if you have around a deposit of around 20%.
• Bank statements: you will need to provide your latest three months’ current bank statements for each account you hold.
• If your savings are held in National Savings, an ISA or similar, try to get evidence. If your deposit is coming from a parent or other family member, they will also need to provide ID and evidence of where that money has come from.
4. Get yourself an Agreement in Principle (AIP)
An “Agreement in Principle” or “Decision in Principle” is not a guarantee of getting a mortgage – nor does it mean that you can reserve a particular interest rate. However, it proves to an estate agent/homeowner that you are on the right track. The AIP will show that:
• You have a provisional agreement from a lender
• You have completed a credit check and credit score
• You will probably know the mortgage is affordable
• The amount you can borrow is confirmed
• You should be able to proceed if your offer is accepted, which puts you in a much better position than a buyer without an AIP.
The AIP confirms your provisional status to proceed with an offer, and most estate agents will recognise how it will benefit their vendors, it could even give you additional negotiation power on the asking price! The AIP could put you at the top of the buyer’s queue; and increase the chances of buying your dream home.
If you would like to get an Agreement in Principle, please click here – link to contact us page
5. Stability is key to success
Banks quite naturally will prefer people to have quite stable backgrounds and will favour customers who have been in the same job for a number of years.
Similarly, they also prefer people who have lived at the same address for a significant time period – rather than those who many have moved address several times over the previous three or four years. Frequent changes in either your employment or address history can definitely go against you. So, if you are thinking of changing jobs, it’s probably better to wait until you’ve bought your new home (this is especially important if you are considering going self-employed or contracting when you may not be able to get a mortgage for a year or two).
Don’t worry if you have recently changed jobs or address, as it may not be a problem. We would normally discuss your circumstances directly with the lenders and make sure they are OK to lend – even if you are still within a probationary period.
6. Personal loans / car finance / credit cards
Whilst having financial commitments such as loans and credit cards shows that you are credit worthy, a mortgage lender won’t want to see that you already owe a significant sum of money at the point of applying for a mortgage.
Try to reduce your commitments as much as possible - (especially credit cards and overdrafts) to give yourself the best possible chance of being approved.
Also reducing your credit commitments will usually mean that you will be able to borrow quite a lot more on your future mortgage!
7. Don't change your financial situation after applying
Quite often a bank will carry out two credit checks on you. The first when you apply, and a second a few weeks later when they offer the loan - or even as late as when you are about to complete the purchase.
The second check is to identify whether you’ve taken on any additional borrowing or had a change in circumstances. So don’t be tempted to sign up for a new credit card, a personal loan, finance agreements on a car or furniture. Whilst you are in the process of buying a property.
8. Buying together
Whilst buying with a friend or relative has some clear benefits, you do have to consider how it could affect you / them in the future.
You can improve your chances of being accepted by doing a joint application with a friend, or relation. Applying with another person can boost your credit score and significantly increase the amount you can borrow. In certain circumstances this can be done without them going on the deeds. Therefore, although you may be joint borrowers, the ownership could still be in your sole name, but each borrower would still be responsible for the full mortgage payment.
For example, what would happen if the joint borrower:
• Stopped paying their share of the mortgage or housing costs?
• Runs into financial difficulties?
• Wanted to buy their own home in future?
There are many situations that could arise when buying with someone else, and because a mortgage is a legal contract you should both seek separate and independent legal advice before proceeding.
9. Moderate your spending
Generally, banks will have concerns if you have payday loans, or if you have significant spending on leisure activities or gambling, as this may indicate background pressures or being unable to prioritise your finances.
Try to moderate your leisure spending as much as you can in the run up to buying a home. After all, you won’t have as much disposable cash when youare a homeowner, so spending less and saving more is a great habit to get into !
10. Be realistic about how much you can afford to spend on a house, and be truthful to yourself.
Because banks arrange thousands of mortgages, they have a very clear understanding of what the average person can afford to pay back each month, and will set your borrowing limits based on the average person’s living costs.
Therefore, don’t be tempted to over-inflate your earnings – especially with overtime, bonus or commission, as you will be asked to prove your additional earnings – not just over the previous three months, but often over the previous 12-24 months.
Also don’t try to hide any commitments, because the banks will almost certainly find out about them.
There is nothing worse than having your loan reduced due to lack of “sustainable” income, or because you have “undisclosed” credit commitments - as this will usually result in your purchase falling though.
Working out what you can comfortably afford to borrow with an experienced adviser is an essential part of the home buying process, We have a responsibility to make sure that you don’t over commit yourself and that you can keep up with your monthly mortgage payments.