Whether you are looking to remortgage as your deal comes to an end, or perhaps you (or someone you know) are looking at your first mortgage, it’s important that you have appeal for the lender who houses the deal you’re after.
We’ve assembled a few top tips to help give you real curb appeal when it comes to presenting your application to the lender.
Tip 1: Do not expect every lender to want you and your app!
Every lender has its own method to decide whether it wants to lend to you. If you fit a lender’s criteria, you might be accepted quickly. If you’re far from ideal, your chances of rejection will increase.
But for people in the middle, it’s more of a grey area and the lender’s scorecard will be based on several factors, such as:
The size of the loan you want to take out. Are you looking to borrow £150,000, £200,000, £250,000, etc?
- How much you’ve saved as a deposit. The bigger your deposit, the less of a risk you’ll likely be seen as.
- Your employment status and income. Are you a permanent or temporary member of staff, a freelancer, self-employed?
- Your credit rating and history. More on this below in point two.
- Your outgoings. This is how you spend your money.
- Your existing debt. This could include credit card debt, student loan, etc.
If you pass, it means it’s more likely to lend to you but nothing is guaranteed.
Tip 2: Get familiar with your credit score
Before you’re even at the application stage for your mortgage, ensure you’re confident your credit file is working for you. Look at the three credit agencies in the UK: Experian, Equifax and TransUnion to ascertain your credit score and how well you measure up when it comes to responsibly managing repayments.
Credit scores look at your spending (and repayments) across:
- Credit cards
- Loans
- Overdrafts
- Mortgages
- Some utilities
Having a poor credit history might not automatically rule out your chances of getting a mortgage, but it certainly runs the risk of scuppering them. To give yourself the best chance possible of acceptance, take the time before you apply for a mortgage to get your credit report into good shape.
Tip 3: Delink from any ex-partners or flatmates to stop their credit score damaging your chances
If you’re financially linked to someone else (which only happens when you apply for joint credit, such as a bank account, mortgage or loan) but you’re now separated or have nothing to do with them, then de-link yourself.
If not, any late payments or misdemeanour they’ve committed will reflect badly on you. Write to the credit agencies and ask for a notice of ‘disassociation’.
You could still be linked to old flatmates if you had a joint bank account for bills, so it’s worth checking that their credit history isn’t affecting yours. If it is, de-link yourself quickly.
Even if the person you’re linked to has a good history now, you still risk problems in future if they miss payments.
Tip 4: Always pay all of your bills on time
It’s obvious – so do it.
All missed payments count against you on your credit file, so it’s vital to keep up all repayments on ALL your outgoings.
A missed-payment default count against you for at least a year, and they’ll stay on your file for the next six years. Miss just one mobile phone payment and it could be the difference between getting a mortgage and not.
Where possible, set up a direct debit to make sure payments are made on time.
Tip 5: Don’t apply for other credit shortly before a mortgage
Try to avoid applying for credit in the three months before getting a mortgage – it could hinder your score and lead to rejection. Some recommend at least a six-month gap, to be absolutely safe.
This is because lenders will search your credit file every time you apply for a loan, credit card, overdraft, and increasingly mobile phone or utility contracts too. This search, known as a ‘hard’ credit check’, is registered on your file even if you don’t take out the contract.
The more searches you have in a short time, the less likely you are to be granted credit, as you could be viewed as desperately seeking borrowing.
If you NEED to apply for credit, it’s unlikely that one application will hurt all that much, provided it’s affordable. BUT – if it’s a payday loan, some lenders will decline you for a mortgage if you’ve had one in the past year.
To underscore the point, recent research has found that a fifth of want-to-be first-time buyers who’ve had a mortgage application rejected were declined because of a payday loan.
This is just a few ways you can start ensuring your application to a lender is looking as attractive as possible, but in general you should practice responsible financial behaviours, such as cutting back on luxuries and not adding to your financial strain in the period leading up to an application.
If you’re ready to look at your mortgage options, get in touch today.
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