Tips for getting your first mortgage approved once you’ve saved a deposit
If you’re hoping to buy your first home in 2018, then you’ll already know just how challenging it can be to get on the property ladder.
Matt Stevens, Director at The Mortgage Genie, shares his expertise on how to maximise your chances of getting your mortgage application approved.
With the average cost of a typical first home set to increase by 3% in 2018 (Guardian), the housing market shows no signs of becoming more affordable for first-time buyers. For many young individuals, couples and families, that means that saving up the cash to cover the deposit can be a real challenge. And it doesn’t stop there: in fact, securing a mortgage involves far more than saving up a down payment.
When considering your mortgage application, mortgage lenders will analyse your credit history, your spending habits, and any outstanding debts you owe to help them decide whether or not they should lend to you. So, if you’re looking to get on the property ladder, you’ll have to spend some time getting your financial records in order. Here, I’ve shared four essential tips that will give you best possible chances of being accepted for your first mortgage.
1. Pay off your debts
Before you submit your mortgage application, you’ll want to try to reduce or clear any of your existing debts, including any credit card balances. This will show prospective lenders that you’re responsible with credit, and that you always pay back your loans, meaning they’re more likely to approve your mortgage application.
So, before you apply for a mortgage, try to reduce any balances on your credit cards as much as possible, and cut up your cards to help you resist the temptation to use them again. When paying off balances on credit or store cards, try not to just move the debt from card to card, as this could damage your credit rating (see below for more advice on this).
If you have substantial debts, or you owe money that’s subject to a very high interest rate, then it might be worth consulting a free debt advice service, who will be able to help you create a payment plan you can manage. Which? has a list of contact details for impartial debt advisors who should be able to help you get your debts under control.
2. Build up your credit score
Credit scoring agencies, such as Experian and Equifax, keep a record of your credit history, including details of how much money your currently owe to various lenders, any payments you’ve missed, and any County Court Judgements (CCJs) against you. Lenders will analyse your credit file when considering your application in order assess whether or not you present a lending risk.
A poor credit rating can seriously jeopardise your application, so it’s best apply for copy of your credit record to make sure yours is up to scratch: a credit checking service, like ClearScore, can provide you with an up-to-date copy for free.
If your credit rating needs a boost, there are plenty of simple ways to build it up. Registering on the electoral roll will instantly improve your rating, as will paying your household bills on time. You should also be careful not to check your rating too often, as this can cause agencies to suspect you are in financial difficulty, which will lower your overall rating. If you are struggling to improve your rating, or if you have serious credit issues like court judgements or defaults on your record, then a good mortgage broker may be able to help you find an adverse-credit mortgage.
3. Get your financial records in order
When applying for a mortgage, most lenders will ask to see evidence of your incomings and outgoings. Having the right documents prepared in advance will make the application process much easier, and will mean that your application is processed more quickly, too.
When considering your application, mortgage lenders will usually need to see proof of how much you earn, so you’ll a need to present a P60 from your employer. Lenders will also want to analyse your spending habits, so they will likely ask to see your bank statements for last three months. To give yourself the best possible chance of being accepted, you’ll want to spend as sensibly as possible in the period leading up to your application, so try to avoid any big expenses or impulse buys, as these can count against you.
Given the many conditions that mortgage lenders now require from applicants, getting on the property ladder can seem a distant dream for many first-time buyers. But, as long as you take control of your debt, build up your credit score, and prepare your financial records, then your perfect home will soon be within reach.