Looking to step onto the property ladder? Take a look at 6 factors that could make or break your application.
So, you’ve decided to buy a property. Whether it’s your forever home or your first home, buying a house is one of the biggest purchases you’re likely to make, and your ability to get a mortgage is a key factor in getting the keys.
While less of us own our own homes than we used to, there are steps you can take to improve your chances. The goal is to make yourself as attractive and trustworthy as possible to mortgage lenders and being aware of the common criteria they’ll look at is a good place to start.
Here are six factors that can affect your eligibility.
1. Your budget
Before you know what size mortgage you can get, you’ll need to ask yourself a few questions. How much do you need for the house deposit? How much are the property’s bills? Can you afford moving fees and essential extras like home insurance?
Working out a solid budget is the best place to start before you apply for a mortgage. If you know you can’t realistically afford to borrow enough to cover the cost of the property, it’s likely that a lender will too, so you may need to save up for longer or carry on house-hunting.
2. Your credit score
Money lenders use your credit score to try and predict if you can be relied upon to make repayments. Your score is based upon things such as your payment history and credit applications over the last six years, and it’s worth checking your credit report to look for ways you can quickly improve yours – such as paying off a debt.
So, what is a good credit score for a mortgage? There’s no exact answer as each credit agency and money lender ranks them differently, but the higher the better.
3. Your income
Lenders want to see proof of your income to as reassurance that you have the financial means to make repayments. They’ll typically ask to see recent pay slips, proof of bonuses or commission and your latest p60 tax showing your income and tax paid in the last tax year.
Being able to prove your income when you’re self-employed can be a little trickier. A lender may ask to see your accounts or an SA302 form from the HMRC for the last three years, which means if you’ve only just decided to go it alone you could face more difficulty with your application.
4. Your debt
Showing that you know how to manage debt without having too much already outstanding can be crucial in being accepted for a mortgage. Lenders want to assess how you will cope with the added debt of a mortgage, so consistently making repayments on time without maxing out your credit availability will stand you in good stead.
Try to avoid making lots of applications for credit in the run-up to applying for a mortgage. This indicates that you’re desperate for cash and being rejected can seriously harm your prospects.
5. Your stability
Stability adds to your trustworthiness. If you’ve moved home lots already, frequently switched careers and regularly made lavish purchases, this could suggest that you’re likely to make erratic decisions in the future that could affect your ability to afford your mortgage repayments.
And do you need to register to vote? It certainly helps – being on the electoral roll is a quick way of showing that you’re settled in an area.
6. Your paperwork
With so many elements involved in a mortgage application, it can be a lengthy process. Having everything filled out correctly and ready to send as one can speed it up while reducing the chances of multiple people reviewing your application and finding flaws.
As well as proof of income, mortgage lenders are likely to ask to see:
ID documents – usually a passport
Proof of address – e.g. utility bills
Proof of deposits – such as savings account statements
Before you send your paperwork off, check that you’ve consistently used your full name, stated your income correctly and declared all your debts. Any mistakes or lies in your application will slow things down and could reduce your trustworthiness.
Now that you know some of the key factors mortgage lenders will look at, you’re better placed to put forward your application for your dream home.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.