Applying for a mortgage can be a complicated process, so it’s smart to fully prepare yourself before you submit an application.
After all, the more prepared you are, the more likely it is you’ll bag yourself a good deal suited to your needs!
Get familiar with your credit history
The first thing you should turn your attention to is your credit history. If you haven’t checked it recently, it’s important you do so now as it can have a big influence on whether you’ll be accepted for a mortgage or not. Free services Noddle and ClearScore are good places to start as you’ll be able to see how well you’ve managed credit in the past.
If you apply for a mortgage and are turned down, stop! Making multiple applications in a short space of time can work against you, as they are recorded on your credit history and future lenders may actually reject your application because of this.
Get yourself on the electoral register
If you’re not registered to vote, it’s more likely that you won’t be able to find a mortgage provider willing to lend to you.
It is also important that other official records, such as your passport and driving licence, are up to date and registered to your current address.
Cancel any unused credit or store cards
The more credit you have available to you, the more of a risk a mortgage lender may see you as. When a provider carries out their checks, they will be able to see how much you could potentially borrow (i.e. the sum of all your credit limits), even if you aren’t using it. So, if you have countless credit and store cards, they may reject your application.
The reasoning behind this is that they don’t want you to borrow more than you’d be able to afford to repay. Having access to all that credit means you could reach a situation where you struggle to repay it – including your mortgage! Not only this, but lenders want to make sure that you’d be able to afford an increase in interest rates should that happen too.
Rein in your spending
Your mortgage provider will carry out affordability checks when they assess your application. This is because they want to know that you won’t be too stretched financially and that you’ll be able to afford to repay each month. At the end of the day, your lender doesn’t want to see you run into financial difficulty a few months down the line if you can’t afford your mortgage repayments, so the affordability checks can be quite rigorous.
In most cases they will ask to see at least three months’ worth of bank statements. So you need to plan ahead: at least three months before you apply you need to alter your spending habits so that your bank statements tell the story that you want them to tell.
For example, meals out, nights out, high-street shopping splurges and pricey online purchases should be whittled down in the months before you apply, as they may scupper your chances of being accepted. Of course, no one’s asking you to rein in on essentials. Things like your food and bills won’t be a problem, although it’s always wise to shop around and see where if you could save further.
Remember lenders don’t make these checks just to be nosy, they simply want to make sure you’d be able to afford the repayments should circumstances change, such as interest rates rising. If you do change your spending habits to help your mortgage application remember that you’ll need to stick to your new ways once you’ve bought your house to ensure that you can make your monthly payments. Mortgages are secured against your property so if you fall behind your home is at risk.
That’s it for part one, in the second part we’ll discuss whether or not you should be taking on any more loans and what you can do about your existing debt. Click here to head to part two >
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.