When you begin looking for a house to buy, it’s important to get everything in order to maximise your chances of getting a mortgage. It is a shame when you find your dream house and then have your mortgage application rejected. Follow these tips to help you get organised and mortgage ready.
Save a big deposit
Mortgage lenders look at the ‘loan-to-value’ or LTV of a mortgage. The lower the percentage of the mortgage against the overall cost of the property, the better chance you have of being accepted.
A larger deposit will reduce the amount you need to borrow. This could also save you money in the long-term, as many of the better interest rate offers are available to buyers with bigger deposits.
Check your credit file
There are many reasons errors can appear on your credit file. For example, if you’ve ever been a victim of fraud, your file can show missed payments on loans or credit cards in your name that you didn’t arrange.
Mortgage lenders may use different credit reference agencies and this could mean the scores or information can vary between each. It’s important to for errors on each as early as possible in your house buying process, as contested errors can take time to remove from your file.
You can check your credit file for free with the main agencies; Experian, TransUnion (formerly CallCredit), and Equifax. If you find something that doesn’t look right, contact them immediately to resolve it as soon as possible.
Clear your unsecured debts
Mortgage providers will factor in the amount of credit you currently owe, and have access to, in their decision to lend to you.
Close any unused accounts and pay off as many debts as you can before you apply for a mortgage. It can take up to 8 weeks for a settled debt to show on your credit score, so remember this before you apply for a mortgage.
Avoid applying for several credit agreements in a short period of time
Whether you need a credit card to pay or you want to secure an Agreement in Principle to help with your house search, avoid applying for several lines of credit in one go.
Try to leave at least a month between each credit application, otherwise this will impact your credit score. If you’re rejected for any line of credit, don’t apply for any more as this has serious implications for your credit rating.
Always pay on time
Any missed or delayed payment could be all it takes to impact your chance of getting the mortgage and rate you need. Multiple missed payments could make it difficult to borrow at all.
Make sure you pay off your credit cards and bills on time. Pay them in full, if possible, rather than only covering the minimum payment. You will clear your debt faster and it will help avoid paying huge interest rates on your outstanding balances.
Speak to a mortgage adviser
Before applying for a mortgage, seek advice from an expert. They will look at your current circumstances and mortgage requirements, and help you to find a mortgage that suited to you.
They will also make sure that you have all the relevant documentation required before you start your mortgage application. This includes photo ID (passport or driving license), proof of your current address, and evidence of any income. You’ll also need to supply your P60 if you’re employed, or evidence of your previous tax returns and accounts if you’re self-employed.