If you are buying your first home or moving to a bigger one, then there’s a very good chance that you’re going to need a mortgage to help you to do so. The bad news is that being approved for a mortgage is very far from a formality. The good news is that it is possible, as evidenced by the many people who successfully do so each year. With that in mind, here are some tips on maximising your chances of mortgage approval.
Build a deposit
There are two good reasons why mortgage lenders prefer borrowers with larger deposits. The first reason is the straightforward fact that larger deposit lowers the lender’s exposure to fluctuations in the property market. In principle, the borrower is responsible for the mortgage, but, in practice, if the worst comes to the worst and the borrower goes bankrupt, it will be the lender who is left on the hook. The second reason is that the ability to raise a large deposit shows that the borrower can save (or has access to financial support from other sources).
Make sure your credit record looks as good as it possibly can
In addition to checking for any clear errors (and getting them corrected), see if you can go a step further (or several steps further) and actively improve it. Sometimes even simple changes can make a difference (possibly only a small difference, but every improvement is a gain). For example, if you’re not on the electoral roll, then get your name added (and if you are on, make sure you’re listed at the address you’ll be giving to your mortgage lender) and if possible, add a landline phone number. On a larger scale (and with potentially more impact), make the time to pay off any small-scale debts you are carrying, such as credit cards you hardly use, and then actually close them (rather than leaving them in limbo). In fact, if you still have any credit cards with zero balances, then ask yourself if you really have a compelling reason for keeping them open and if the honest answer is “no” then close them. If you need any more encouragement to take this step, then remember that every financial product you own is a potential point of compromise and so minimising the number of companies which have access to your financial details should also reduce the likelihood of you becoming a victim of fraud and/or identity theft.
NB: remember that the UK has three main credit-reporting services Experian, Equifax and CallCredit and you will need to check your record with each of them to get a full picture of how your financial history will look to a lender.
Keep your finances on a steady track
Remember that your credit record is only the first check a lender will make. If you pass this hurdle, they will want to take a more detailed look at your spending by means of your bank statements. With this in mind, you want your statements to give the impression of a person who lives their life in a way which is unlikely to give a potential lender a moment’s cause for concern. So, for example, unless you are really desperate to leave a job you hate, wait until your mortgage is 100% secured before doing so and if your plan is to start your own business, then hold off making any purchases which make this obvious to the lender. In other words, while you have to answer any questions truthfully, you only have to answer what they actually ask. Always remember, however, that the onus will be on you to keep up with your mortgage payments and that the consequence for not doing so can be losing your home, so resist any temptation to over-stretch yourself from the start.
Your property may be repossessed if you do not keep up repayments on your mortgage.
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