Maximise approval for a mortgage
Maximise approval for a mortgage
Whether you’re becoming a first-time buyer, remortgaging or moving house, waiting for that mortgage application approval can be a bit like waiting for exam results – you’re never quite sure what the results might be. To make sure you do everything you can to get a “yes”, read our top tips for mortgage approval.
Top tips on getting accepted for a mortgage
Check your credit score
The first stage for a mortgage lender is for them to check your credit history to ensure you’ve got the commitment, discipline and means to pay your mortgage back.
You should always check yourself out before potential lenders do. If you apply for a mortgage and your application is not approved, this can impact your score. Being aware of your current rating can give you an idea of whether your finances are in a good position before you start your application.
How do I check my credit score?
You can check your credit report for free at Experian (the largest of the three) and Equifax if you sign up to their free 30 day trial – just be sure to cancel before they start charging. CallCredit also provide a free credit check, along with other companies.
Can other people impact my score?
Yes, so remove yourself from undesirable associations if you have a financial agreement, such as a utility bill. Make sure that any old financial links you have with ex partners or previous flatmates are severed, because if you’re financially linked to someone who has a dodgy credit history, it’ll damage your own score.
11 tips for maximising approval on your mortgage
1. Get on the electoral roll
Lenders may use the electoral roll to check that you are who you say you are and they’ll also use it to check where you currently live.
Being on the electoral roll is vital if you want to get a mortgage. If in doubt, check with your local council who’ll be able to help you if you’re not.
2. Give credit where it’s due
Not all credit is bad credit. If you have a good credit history – have never missed repayments, and manage your debts well – then it shows lenders that you’re sensible and disciplined about borrowing money. This makes you a more attractive candidate compared with someone who has no credit history at all.
It might sound odd that never relying on credit could work against you, but lenders like to see evidence of good money management. If you’ve got no credit history, there’s nothing for them to base an opinion on.
3. Be sensible with the debts you do have
On the flip side, just because lenders like to see your skills at money management, it doesn’t mean you should start maxing out your credit cards. The key detail is in how you manage your debts.
As a general rule, if you want to take out a mortgage you should be using less than half of the credit that’s available to you.
For example, if you have £5,000 worth of credit available total, then you should be using less than £2,500 of it. If you can, try and pay off any small outstanding debts you have to try and minimise what you owe and close down any existing cards that you don’t use.
4. Have some savings
Chances are, you’ll already have some money saved for a deposit if you’re buying your first house time – but the more you can save, the better. As obvious as it sounds, the more money you have saved, the more favourable lenders will be towards your application. A bigger deposit will also open more doors for you in terms of better interest rate options.
5. Don’t apply for credit just before you apply for a mortgage
Take a break from borrowing before you apply for a mortgage. Each time you apply for credit, it’s noted on your credit file even if you don’t actually go ahead with the application. If lenders see that you’ve asked about credit lots of times just before you ask for a mortgage, they’ll start to wonder if you’re desperate for cash and it will send alarm bells ringing.
It's important to consider your debt to income ratio and perhaps work on improving your credit score before considering buying a house.
6. Spend wisely
Lenders will ask you to provide several months’ worth of bank statements so they can see for themselves whether you have the means to meet your repayments. So you might need to think twice about any weekly treats or expensive non-essentials.
It’s a good opportunity to have a financial detox – so cancel that gym membership you bought with good intentions but never used.
7. Straighten out your paper work
As well as detoxing your finances, you’ll need to straighten out your paperwork. As previously stated, lenders will want to see evidence of your income and outgoings, so you’ll probably be asked to provide three months’ worth of bank statements, payslips and your last P60.
8. Be accurate and honest
Always state your finances as accurately as possible. Don’t embellish or try to hide that expensive impulse buy – you’ll be found out and your lender might start thinking about what else you’ve hidden.
9. Choose a suitable property
Lenders don’t like surprises when it comes to mortgaging houses and they tend to be conservative in what they’ll approve an application for. So you might want to live in a grand design on stilts but your mortgage lender probably won’t share your passion.
You may also need to be careful about properties with certain types of tenure too – flying freeholds (where part of the property is built over land that doesn’t belong to it) or properties with short leaseholds might be off-putting to some lenders.
10. Find your perfect match
Not all lenders are the same and approval criteria will differ from lender to lender. Think of your mortgage application as a pick ‘n’ mix selection – lenders will have a look and focus on the applications that take their fancy.
If you’ve used the services of a mortgage broker or independent financial advisor, they’ll be able to steer you towards lenders who are likely to be more favourable to the type of borrower you are.
11. Find the right guarantor
Getting help to boost your deposit or persuading a relative to be your guarantor can help your application too, particularly those with a low deposit. The exact meaning of what being a guarantor entails differs among lenders, so if this is a genuine option for you, it’s worth getting advice from your mortgage provider about the sort of commitment you’d need from your guarantor.