Here are five things you can do to fix up your finances and boost your chances of mortgage success
Now that you’re on your way to saving enough for a deposit, the next thing to think about is making sure your hard work doesn’t go to waste and that you get approved for that mortgage.
After the 2008 financial crash, lenders introduced much stricter mortgage checks. Gone are the days of nothing but income checks - getting a mortgage is now much harder and there are a lot of boxes that you need to check before you get to sign on the dotted line.
Having a big enough deposit is just one part of a mortgage application, so to help you get your finances in shape and make sure your mortgage application is approved first-time around we’ve put together our 5 top tips:
Not sure how much you can borrow? Here's how to work that out.
1. Get to work on your credit score
First things first, you’ve got to make sure your credit report is looking spick and span before you make an application. Your credit score won’t shoot up overnight so depending on where you’re starting, you’ll need to crack on with this step a good few months (or even years) before you want to apply.
When assessing your mortgage application lenders will run a check on your credit report to see how you’ve handled credit in the past. If you’ve got a proven history of borrowing responsibly, and a high credit score, it’s a positive sign for lenders. If your credit score
You can see your credit score and report by logging into ClearScore. There you should check for any errors such as accounts or searches you don’t recognise.
You can see your credit score and report by logging into ClearScore. There, you should check for any errors such as accounts or searches you don’t recognise.
Check for errors, use credit often and always pay your bills on time. There are a lot more factors to consider - for a full list of ways to improve your score, check out our other learn article.
2. Pay down your debts and cut out excess spending
A mortgage is a lot of money to lend to someone and although it’s secured against the value of the house, lenders still want to make sure that you can afford the monthly repayments.
To do this the key things they’ll check will be your income, your outgoings, and your debt-to-income ratio.
To assess the state of your finances, lenders will ask to look at bank statements from the past few months. So before you undergo your affordability assessment, it’s good to be extra careful with your spending. If a lender sees that you consistently overspend, or always end up in your overdraft before payday then they may view this in a negative light.
The lenders will also check your debt-to-income ratio when assessing your application so it’s a good idea to actively pay down your debts before you apply. If you have some spare savings, for example, it could be worth using those to pay off your debts before you apply. this will quickly reduce the amount you’re spending on debts each month and so put you in a better light with the lender.
To complete this step make sure you’ve completed our Coaching plan all about how to ‘Get your credit report mortgage ready’ - it tells you everything you need to do to impress those lenders.
3. Keep things steady
Lenders like stability. It shows that you’re easy to track down, reliable and in a good place. If you’re applying for a mortgage it might be worth holding off on any big changes such as changing jobs if you’ll still be in a probationary period when you apply.
If you’ve been thinking of going freelance, again it could be worth considering holding off until after you’ve secured your mortgage.
4. Get your paperwork in order
This step will help make sure that the process is as easy as possible when you start talking to mortgage lenders.
Typical requirements include: ID and proof of address, so, ensure your passport and driving licence are correct and in date. Income evidence and proof of financial readiness are also key, and you will likely need to provide a combination of the following - P60, 2-3 months of bank statements, payslips or 2-3 years of company accounts/SA302s.
If you are a contractor, it’s a little more complicated. Make sure your CV is up to date as it may be used to prove your skills and experience. You will also need to obtain a copy of your current contract as this will be used to demonstrate your earnings. Using both documents you may be able to avoid any issues to do with affordability.
5. Talk to a qualified mortgage broker
A mortgage broker is basically a financial advisor that specialises in mortgages. Going through a broker can improve your chances of finding and being accepted for a good mortgage option for you.
They work to find the right mortgage with rates to suit your budget. They take into account your financial situation before making any recommendations meaning you can be more confident of any applications you make.
If you’re still not sure if buying a home is within your reach, check out the next article in our series, where we spoke to some ClearScore users who have managed to overcome all the obstacles and get on the property ladder…