Buying a property isn’t as simple as finding a home that’s in your budget and within reach of your work. It’s also about getting your financial affairs in order at least a few months to a year before you apply for a mortgage. To help you improve your chances of being approved for a mortgage, here’s a quick overview of how you could help lenders see that you’re ready to take on a mortgage.
Make sure you’re on the electoral role
This is so that mortgage lenders can confirm your address. If you’re not registered on the electoral role lenders are likely to just put your application to one side.
Check your credit history and credit score
Before you make a mortgage application, take a look at your credit history so that you can spot any inaccuracies on your file. If there are any errors, let the credit reference agencies (CRAs) know and ask them to correct them. It’s worth letting all three know (Equifax, Experian and TransUnion, previously known as CallCredit) as different lenders use different credit reference agencies. This is important because you want to let mortgage lenders see that you have a good track record for paying debts. If your credit score is low, try to see why and adjust your behaviour accordingly. For example, if the score is poor because you don’t pay bills on time, make sure you do so in the future.
Pay all your bills in full and on time – all the time
If your credit history and credit score are in apple pie order at the moment, you need to keep up the good work because you don’t want a late bill payment leading to a mortgage application being turned down. Credit histories are continuous and a mortgage application can take a while, so it’s possible that a late payment could show up when you least want it to.
Cut your debt to income ratio
The less debt you have in comparison to your income, the more money you’ll have to use on making your monthly mortgage repayments. If possible, pay off all the debts that you can and certainly avoid taking out any further loans until you’re approved for the mortgage.
Don’t apply for any loan that you don’t really need
At least six months to a year before you want the new mortgage, try to avoid applying for any loan or credit card. As pointed out above, it’s best to try and improve your debt to income ratio with less debt ant more income – if possible.
If you must apply for credit before you apply for a mortgage, be selective
Don’t just apply for credit if things are a little tight as it will highlight to lenders that you’re desperate for money at best. At worst, if your application is rejected you’ll have a negative affect on your credit history as searches for credit are often recorded. What’s more, if you’re rejected for a small personal loan it’s hardly a glowing recommendation for approval for a mortgage.
If you’re making a joint application, the same steps apply to them
By applying with a partner or spouse, you’re making a financial association. So even though you may have kept your finances completely separate from each other until now, because you’re making a joint mortgage application, you’ll both have your credit records and credit scores reviewed by the lender. Therefore, both of you need to make sure that you carry out the previous steps.
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This is a collaborative post.