10 Ways to Increase Your Chances of Getting a Mortgage
You’ve found the perfect place. Nice house. Great street. Even the neighbours look normal. Now all you need is a mortgage to seal the deal.
If you’re not careful this can be the tricky bit. You’re likely to encounter a fair number of hoops to jump through before you can start putting your possessions into cardboard boxes.
Whether you’re a first-time buyer or looking to move up the property-ladder, there are a few things you can do to increase your chances of getting a loan approved. Here’s 10 of the best.
Save the biggest deposit you can
The biggest hurdle may be saving enough to get a decent deposit together, especially if you’re a first-time buyer. The bigger the deposit, the smaller the total cost of your mortgage, the better the interest rate and the happier the lenders. The latest Government scheme designed to help save up for a deposit is the Lifetime ISA, which comes with a bonus of 25% if certain conditions are met. Research and check out if you’re eligible.
Get on the electoral roll
Make sure you’re registered at your current address. This is important to check, especially if you’ve moved around a lot. It’s easily sorted. Just contact your Local Authority and ask for a registration form, or sign-up online.
Pay off loans
A no-brainer. When deciding whether to take you on as a customer, mortgage lenders will look closely at the amount of credit available to you and what you owe. Clear as much of your debt as possible and close any accounts you no longer use.
Improve your credit rating
Avoid any surprises and check your credit score. It’s easy enough to do online and there are things you can do to improve it. Credit reports have been known to contain errors and outdated information that you can address. Get this in order before any checks are run on you rather than after.
Choose the right property
You might have set your sights on a quirky property, but chances are your lender won’t share your sense of adventure. Best avoided are flats above cafes and bars and old or unusual homes built from non-standard construction materials such as concrete or steel.
Get your paperwork in order
Mortgage lenders don’t like any doubt as to who you are. Get your passport and driver’s licence up to date and make sure bank letters and utility bills show your correct name and full address. Employed workers will have to show bank statements and payment slips for the previous three months and P60s for the last two years. Any other income, such as Child Benefit, will have to be evidenced too.
Self-employed workers make lenders nervous and must provide even more evidence of earnings than employed workers. So, cover all bases and gather as much information as possible. You’ll need an SA302 form from HMRC for the last two to three years and full accounts.
Know what mortgage you want
Do your homework. Mortgages come in all shapes and sizes – fixed-rate, trackers, discount – it’s a minefield. It’s important to know what will work best for you. But, be realistic. Don’t attempt to overstretch yourself as it could be a costly mistake that hangs around your neck for the next 25 years.
Once you’ve decided what type of mortgage you want, you need to shop around. Finding the cheapest deal could save you thousands, if not tens of thousands, over the term of your loan. You might even want a conversation with a mortgage broker to see what’s available – but make sure you find out what they charge in terms of commission.
Consider help to buy
Check out the Government’s Help-to-Buy equity scheme. This enables first-time buyers to put down a 5% deposit and get a 20% Government equity loan to help fund the rest, which could help dramatically reduce your repayments.
Enlist your relatives
The hike in property prices has impacted on how big mortgages are in relation to wages and securing a loan could be even harder as a result. Consider asking parents to act as guarantor on your mortgage. This means they guarantee the mortgage will be paid and become liable if it’s not. Guarantors must demonstrate they can cover their own bills as well as your mortgage payments if necessary.
Happy new home hunting!