How can I improve my chance of getting a mortgage?
Found your dream home, and thinking of buying? For many people across the UK, getting accepted for a mortgage is one of the main factors that determines whether or not they will be able to get the property they have always dreamt of having, especially as deposits for houses keep on increasing in the country, making buying a property one of the biggest personal expenditures that they are likely to ever face. With competition remaining fierce when it comes to being accepted for a mortgage, we explore everything you need to know about mortgages and how you could improve the chances you have of being accepted for one.
What is a mortgage?
A mortgage is a loan provided by a bank or another loan provider that is a property loan used to help you put down a deposit on a property. Depending on your application and personal circumstances, this could equate to a mortgage that represents the entirety of the deposit amount or just some of it. To give you an estimate of the average mortgage UK homeowners takes out, it is thought that it comes to around £85,000. This is according to a study carried out in 2015 by the Bank of England.
Why is it difficult to get a mortgage?
Unsurprisingly with so much money at stake, banks tend to very strictly regulate mortgages. This means that there can be certain criteria that must be met, which will determine whether or not you will be accepted for a mortgage.
How many people are declined for a mortgage each year?
Estimates can vary according to the research undertaken and the criteria assessed, but it is thought that on average 30% of all mortgage applications in the UK are declined each year, according to a 2014 survey by Urban.org.
How to improve your mortgage applications chances
As we have outlined what mortgages are, and why it can sometimes be a challenge in order to be accepted for one, let’s now consider the ways in which you can improve your chances of getting a home loan.
Make sure you are on the electoral register
One of the best things you can do to improve your chances of being accepted for a mortgage is to double check you are on the electoral register. It is an important step not only if you are applying for a mortgage, but it is almost always essential for almost any time of loan application made. Why is that the case? Well, most companies and lender will look at the electoral register as their first port of call to verify you are who you really are. If you aren’t you can expect that there will be a fairly strong chance that you will be declined. Consequently, if you have moved around a lot, you should ensure that you are registered at your current address.
Improving your credit score
Getting a copy of your credit report is an easy thing to do, and definitely worth your time sorting out prior to making a mortgage application. Many credit references bureaus will offer these sort of requests for free in the form of a free trial. Trusted credit reference agencies include CallCredit or Experian, and its worth researching to see if they have any current offers. Alternatively, many companies offer a one-off credit report for a small fee, sometimes for as little as £2.
As previously mentioned, it would be wise to check your credit report prior to applying for any mortgages, this is due to the fact that having a poor credit history can make it very difficult to get accepted for a mortgage, if at all. On the other hand, a good score means you will have a better chance of getting one of the best deals currently available on the market, and therefore have more options to choose from. As a result, it may well be worth delaying a mortgage application if you have a bad credit score and work on building it, such as through credit builder loans.
In addition, checking your credit report allows you to see if there are any items on it that are outstanding that you weren’t aware of, as this can also affect your score. Similarly, regularly checking your credit history allows you to keep an eye on any potential fraudulent actions on your account, which could equally affect your rating if not corrected.
If you are young person trying to get a mortgage, you might find it especially hard, as it is likely you have little to show in terms of a credit score, which can make the chances of being accepted for a mortgage more difficult, so consider using car finance or as previously mentioned credit builder loans.
Close any unused accounts and pay off unsecured debt
It is important to remember that you will be judged by mortgage providers on how much debt you owe. As a result, it is vital you clear any outstanding unnecessary loans or repay as much as you can afford. This includes store cards, credit cards, and payday loans you may have.
Be careful when it comes to joint mortgages
There are certain factors you need to consider if you are applying for a joint mortgage. For example, you must remember that their credit rating will also be taken into account. Consequently, if you are applying for a mortgage with a spouse, friend or sibling, it is worth checking before applying to see if they have a bad credit history as this can seriously harm your chances of being approved for a home loan.
Try to save with a bigger deposit
If possible, try to ask for the smallest mortgage amount you possibly can, as you will have a greater chance of getting a mortgage if you already have money upfront. It makes sense: if the bank or lender has to lend you less cash then that means there it decreases the element of risk for them. You may also find that you get better interest rates too in this scenario. Some of the best deals on the market are for those who are able to afford a higher deposit.