6 factors that can affect your mortgage application

Buying a home is probably the biggest purchase you'll ever make. Getting a mortgage (a special type of loan for buying homes) is a key step in this exciting journey.

Not everyone who applies for a mortgage gets one. But don't worry! You can take steps to improve your chances. Mortgage lenders want to feel sure you'll pay them back. Let's look at what they check when you apply.

1. Your budget

Before you apply for a mortgage, work out how much money you need. Ask yourself:

• How much money do you have for a deposit?
• Can you afford the monthly bills for the house?
• Do you have enough extra money for moving costs and home insurance?

Create a clear budget first. If you can't realistically afford to borrow enough for the house you want, mortgage lenders will notice too. You might need to save more money or look for a less expensive home.

2. Your credit score

Lenders look at your credit score to see if you pay your bills on time. Your score shows how you've handled money over the last six years.

Check your credit report before applying for a mortgage. You might find simple ways to improve your score, like paying off a small debt, or registering on the electoral roll.

What makes a good credit score for mortgage approval? Each lender has different standards, but higher scores will generally help you get better mortgage rates and terms.

3. Your income

Lenders need proof that you earn enough money to make mortgage payments. They usually ask to see:

• Recent payslips (usually for the last three months)
• Proof of any bonuses or extra income
• Your latest tax forms showing your yearly income

If you’re self-employed, lenders might ask for three years of financial records. This may make getting a mortgage harder if you've just started working for yourself.

4. Your debt

Having some debt is okay if you manage it well. Lenders check how much debt you already have before adding a mortgage.

They like to see that you:

• Make payments on time
• Don't max out your credit cards, e.g. keep your credit utilisation as low as possible
• Don't apply for too many loans at once

Try not to apply for new credit cards or loans right before asking for a mortgage. This makes lenders worry that you need extra money to pay your bills.

5. Your stability

Lenders like people who show stability in their lives. If you move homes often, switch jobs frequently, or spend a lot of money on big purchases, this might worry lenders.

They want to see that you'll stay in one place and keep a steady job so you can make your mortgage payments.

An easy way to show stability is to register to vote at your current address. This helps prove you've been settled where you live.

6. Your documentation

Getting a mortgage involves a lot of documents. Having everything filled out correctly and ready to submit can speed up the process.

Besides proof of income, mortgage lenders typically ask for:

• ID documents, e.g. a passport or driving licence
• Proof of address, e.g. utility bills
• Bank statements showing your savings for the deposit

Before submitting your application, check that you've:

• Used your full name consistently
• Stated your income correctly
• Listed all your debts

Any mistakes or untruths will slow down your application and might make lenders trust you less.

What stops you getting a mortgage?

As we’ve covered, lenders will assess your financial situation before approving your mortgage application. Things which can stop you from getting approved include:

• A poor credit score – Actions like missed payments can block your path
• A small deposit – The less you have to put down, the more the lender has to provide, and so the greater risk to them
• A low income – As a general rule, lenders can offer a mortgage equivalent of four and a half times your salary
• Too much existing debt – This can make lenders nervous as to your reliance on credit, and therefore your ability to repay your mortgage
• Your job history – Short spells in multiple roles may suggest instability of income
• Issues with property – If the home you’re looking at is in poor condition, lenders may worry that they’d struggle to sell it if you missed payments and the property was repossessed

Ready to apply for a mortgage?

Now that you understand what affects mortgage approval, you can better prepare your application. Taking time to improve these six factors can help you get the keys to your dream home!

Remember, mortgage lenders want to feel confident you'll repay the loan. Follow these tips, and you'll be in your new home before you know it!