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Applying for a mortgage? Time to get your house in order
If you’re looking to move house, getting a mortgage can sometimes feel like an uphill struggle. It can be difficult to be accepted for a mortgage, especially as the rules around mortgage lending have got tighter. However, though it’s undoubtedly harder for some people to get a mortgage than it once was, it’s certainly not impossible.
Back in April, the results from the Mortgage Market Review (MMR) were implemented by the Financial Conduct Authority (FCA) to provide customers with the assurance that lenders would do what they can to check that individual applicants would be able to repay what they borrowed without over-stretching themselves, even if mortgage interest rates were to rise (as they are predicted to do). This is a good thing as it should reduce the risk of people getting behind with their mortgage payments, but it does make it tougher for many who are looking to borrow.
Following the MMR, you’ll need to demonstrate to lenders that you’ll be able to make the repayments on your mortgage. To give lenders the best chance of establishing this, you’ll be asked about your spending habits and you’ll need to provide physical evidence of your monthly outgoings and incomes so they can calculate whether you can afford what you say you can.
Improve your chances
To give yourself a better chance of securing a mortgage, you need to look at your finances from the perspective of a prospective lender. Would you be willing to lend to someone who had recently applied for a credit card, short term finance or who had missed payments on their other debts, for example? All of these things can affect how much lenders will be willing to let you borrow, or if they’ll lend to you at all, as they could give off the impression that you’re struggling with your finances.
It might be a good idea to do a mortgage ‘dry run’. Work out a budget with how much you can realistically afford to spend per month on a mortgage, and see if you’ll be able to cover the payments. Remember to take into account irregular expenses such as birthday or Christmas presents, and ensure you’d still be able to afford it in those months.
First off, make sure you’re on the electoral roll. Lenders use this to verify you are who you say you are, so make sure you’re signed up to vote.
You should also work on reducing any other debts you might have. Ensure that you’re making all your payments on time, and that you’re not neglecting any. As a general rule, try not to rely too much on credit in the lead-up to making your mortgage application. After all, if you have to borrow money to make ends meet or you spend a large part of the month in your overdraft, you might want to think about whether you’ll be able to afford a mortgage as well. Another tip is to run credit check on your credit score and make sure everything’s in order. If there’s anything wrong, such as a missed payment or default showing up that you know you aren’t responsible for, make it a priority to get any mistakes fixed straight away.
Taking on a mortgage is a big commitment and if you can’t keep up with repayments your home could be at risk. By following the above advice, you could have a better chance of showing potential lenders that you can confidentially manage your credit commitments, which may put you in a better position of being accepted.