Applying for your first mortgage as a first time buyer might seem like a daunting task but it’s really not that tricks and by following a few simple steps, you can improve your chances of approval and make the process as stress-free as possible.
Here’s 10 things which every first-time mortgage applicant needs to take note of:
- Check Your Credit ScoreLenders want to know that you’re a safe bet and that you have a proven track record of paying bills on time and repaying loans.
Before a lender checks your credit score, check your own to give you the opportunity to do something about it if it’s not looking too great.
You can sign up for a free trial at Experian or Equifax (or a number of others) to see your score.
- Register To VoteEven if you have a perfect credit score, if you’re not on the electoral roll, it will be almost IMPOSSIBLE to secure a mortgage.
A credit check will reveal if you’re on already or you can check with your local council.
If you’re not, sign up straight away at www.gov.uk/get-on-electoral-register.
- Close Old, Inactive Bank Accounts & Credit CardsOld bank accounts and credit cards can, in some instances, have a negative impact upon your mortgage approval and it may sometimes be better to close those which are not being used.
The issues here arise from having ‘too much credit’ available in the form of credit cards and overdrafts but before you close all but one account, think carefully as you don’t want to remove evidence of a great credit record.
If you really do have too much credit available though and regularly use your main account and credit card, it may be worth closing.
- Refrain From Applying For Any More CreditWhatever you do, refrain from applying for any more credit in the run up to applying for a mortgage; ideally for at least six months.
Even if you don’t take out the credit, applications will register a search on your file and more searches you have in a short time, the less likely you are to be granted credit, as you could be viewed as desperately seeking borrowing.
- Reduce Your Monthly OutgoingsLenders have been known to ask for details of spending on things such as magazine subscriptions in their attempt to undertake affordability checks. You will be asked to verify a lot about your outgoings and will be asked to provide bank statements.
This is done for them to ensure that if mortgage rates increase, you can still afford your mortgage.
Do your best to cut back on unnecessary outgoings before applying and use the money to add to your deposit.
- Buy With Someone ElseBuying together with a partner, your parents or even a friend can help to improve your chances of approval, due largely to the fact that the household income will be higher.
This will, in many cases, allow you to apply for a larger mortgage whilst also comfortably meeting affordability criteria.
- Stay Put In Your Current JobLenders want to know that you’re in a safe and secure job and with that in mind, it’s not a wise idea to change jobs before applying for a mortgage.
If you’ve recently moved jobs and are looking to take out a mortgage, best practice is to wait at least six months to show that your position is established.
- Reduce DebtsAnything you can do to reduce existing debts will go a long way to helping you secure a mortgage on your dream home as the last thing lenders want to see is that you owe a small fortune on credit cards and loans.
Reducing debts will not only help you to secure the mortgage but may also allow you to borrow a higher amount.
- Be RealisticIf you’re looking to buy your first home, be realistic!
Everyone has to start somewhere and you’re better off being at the bottom of the property ladder in a small property than having your application rejected.
Whilst each lender uses slightly different multiples to work out how much you can afford to borrow, you stand a far better chance of approval if you apply for a smaller amount rather than aiming too high on a property you can’t really afford.
- Save Up A Bigger DepositWhilst this might be obvious, sometimes it pays to put off your application by a year or so and save up a larger deposit.
The government recently introduced the ‘Help To Buy ISA’s’ which see the government boost your own savings by 25%, that is for every £200 you save you receive an additional £50.
A larger deposit will often see you paying a lower rate of interest as well as being able to borrow a higher amount.
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10 Ways To Improve Your Chances Of Getting Approval On Your First Mortgage – An infographic by the team at Search Mortgage Solutions