Not everyone will qualify for a mortgage – a third of self-employed mortgage applicants expect rejection, according to a recent study. It is up to individual lenders to judge whether you can afford the repayments and if you’re a safe bet for a loan.
So how can you increase your chances of getting the green light for a loan to buy the home you want?
Here are five things you can do:
1. Get your credit report shipshape
When applying for a mortgage you will be credit checked, so now is the time to check your credit report and ensure all the information it contains is accurate and up to date. If your report is less than perfect, it could cost you the mortgage you want. So make sure you make all bill payments and credit payments on time. Equally, a mortgage application can be held up if there is a problem which often arises where mistakes are made on credit records. Making sure it’s squeaky clean – and correct – before you start could save you lots of time. Since the introduction of GDPR in May 2018, you can now get your credit report for free. It is worth checking all of them are up to scratch, as you don’t know which one(s) your future mortgage lender will check. However, most lenders tend to use either Equifax or Experian.
2. Save as big a deposit as possible
It pays to save as much as you can, as the bigger the deposit, the lower the interest rates on offer for a mortgage. This is because the lender is putting less money at risk, and rewards you with cheaper rates.
Those already saving can assign more money into their deposit fund that would previously have been earmarked for stamp duty. It has been waived for first-time buyers on homes up to £300,000. Those up to £500,000 will come under the exemption – with stamp duty only payable on anything over £300,000.
3. Limit your spending
Your lender will look at your spending levels and patterns. If you think there’s too much going out unnecessarily, identify things you could cut out. Make sure you’re not overpaying for utilities such as energy, TV subscription, credit card debt and insurance by using a comparison website to get you onto the cheapest tariffs possible.
4. Reduce your debts
Debts will be counted against you by a mortgage lender and will reduce the amount you’re able to borrow. Pay off as many as you can – and make sure you are paying the least amount of interest possible. This means repayments made go towards paying off the debt rather than interest payments.
5. Find a good mortgage – and a good broker
With a deposit saved, your credit report gleaming and your financial affairs streamlined, you might be ready to start looking for a home. Even if you haven’t found the right place, you should do some research on what mortgage you can apply for. Finding the right one for you is not just a matter of finding the lowest interest rate. There’s more to it. Consider the overall cost of the mortgage – including all fees and incentive packages such as cashback.
Using the bank you already use for your current account can mean you’re not going to apply for the best mortgage for your circumstances and could limit your options.
Your bank – and any high street bank – will only be able to offer mortgages from its range, and crucially, limits you to just one single lending policy.
Choosing an independent mortgage broker who has access to the whole of the mortgage market means if your circumstances don’t fit with your bank they will have access to a raft of lenders to ensure you get the right mortgage.
A broker can also offer extra help for those who deviate from what might be considered “the norm”.
That includes those who are self-employed, women on maternity leave and those with a young family and high childcare costs.
Hiten Ganatra, managing director at Visionary Finance, says: “Getting that all-important mortgage offer through in black and white is the key to getting the home you want.
“Preparation is key to a fast and stress-free application and approval experience. It’s worth lining everything up so you’re ready to move on your house purchase.”