Mortgages are tricky at any given time. Brokers are worth their weight in gold at the moment. See our tips below to help you get prepared and give you the best chance of securing a great deal during this turbulent time.
1 – Preparation is key – sort your paperwork.
Your paperwork is a great place to start. Lenders need proof of your income, ID, address, and deposit before they can offer mortgages.
In your appointment with your mortgage broker, they will ask for this information and proof too, so if you can gather together the following before any appointments or applications, it will really help create a smooth transaction and process for you.
Ideally, you should have the following ready:
- Photographic ID
- Proof of address (could be a utility bill, council tax bill, or financial statement dated within the past 3 months)
- Last 3 months’ bank statements
- Last 3 months’ payslips or latest self-employed income proofs from HMRC
- Proof of deposit or gifted deposit letter if you require it for any funds that are being gifted to you for your new purchase
2 – Check your credit report.
Your mortgage decision in principle and application will involve a credit check. Lenders check your credit report to show you have a good repayment history and are a trustworthy customer to lend their money to. i.e., you’re going to pay it back!
Checking over your credit report should highlight any discrepancies you’ve had. It should also show balances for any current credit commitments, and ensure that all background data, such as your address, is correct.
3 – Correct any issues on your credit report.
Once you have checked over your report and can see any errors there, you may wish to get them investigated.
Only the company that has placed any late payment marker, default or CCJ can remove this; no one else can. So if you believe something to be incorrect or even fraudulent, it is important to contact that company and have the issues looked into and hopefully resolved prior to applying for your mortgage.
If there are any credit ‘blips’ that you are responsible for, all hope is not lost, there are lenders out there who can still help, and your broker will go through all options available to you.
4 – Get on the electoral roll.
Once you have registered to vote, whether you intend to or not, it actually helps your credit report. Not necessarily by raising your score or improving it in any dramatic way, but because electoral rolls are often used as a proof of address. So, if the lender can determine your address history this way and match it to your application notes, it may prevent further documents from being required and further stabilise your creditworthiness.
5 – Remove any old significant others or flatmates from your accounts.
If you still hold a joint account with someone you aren’t associated with anymore, it may be a good idea to remove yourself from these old delinquent accounts. Sometimes, people with whom you have a financial association can hinder a credit check if they do not have the same good history as you. This is not always the case, but it is good practice to keep your report ‘clean’.
6 – Same goes for old accounts.
If you have bank accounts you don’t use anymore, old utility accounts, or even a credit card or utility at a previous property that hasn’t been closed down or that you haven’t used for years, the address history and information regarding your details may be out of date. Leaving them open could be a fraud risk, and the out-of-date details may hinder your credit report.
7 – Always pay your bills on time.
This may sound like a no-brainer, but it’s vital, as all missed payments count against you on your credit report. It’s vital to keep up with all your repayments on all of your outgoings. This includes utility bills, phone bills, credit cards, loans, and even some insurance payments. Set up direct debits so that you can ensure the payments are made on time each month and that cash is available in your account in order to do so.
8 – Manage your available credit
If you have credit cards with balances, it’s important to keep these balances within a manageable limit, not only for your own personal budget but also for your new mortgage lender and their ‘risk appetite’. There is often a fine balance between affordability calculators and lenders’ own indebtedness criteria.
Experian advises on the following:
- If you have debts, lenders prefer that they make up less than half of your available credit. To be really safe, try to keep any debts equivalent to 25% of your available credit. So if you have a combined limit of £10,000, lenders rather you use less than £5,000 of it, but ideally sticking nearer to the £2,500 mark.
- If you are using a decent proportion of your available credit, avoid lowering your limits too much. Similarly, don’t have tens of thousands of pounds of available credit unnecessarily – new lenders get twitchy that you could suddenly be far more indebted than you currently are.Each lender’s views on how much credit you ‘should’ have are different. If you can, try to average around 25% of your available credit. If you need to use more, keep it below 50% in all cases. It is, however, always advisable that if you can pay off debt, you should do so.
9 – Try not to apply for other credit shortly before applying for a mortgage.
Try to avoid applying for credit in the three months leading up to your mortgage. It can take this long for your credit report to update with new balances, and, as you may see when you investigate your credit report, too many credit applications in a short space of time may damage your overall score and creditworthiness. This will be brought up in time once your payments are made and are on time, but it is best not to take the risk when applying for your mortgage as you want your credit report to be as ‘clean’ as possible.
If you do need to apply for credit, it’s unlikely that one application will hurt as long as it is affordable and factored into your monthly budget. However, if it is a payday loan, some lenders will decline you automatically for this as they do not like to see these on any report at any time, especially within the past 12 – 24 months.
10 – Try to limit the use of your overdraft if you have one.
Overdrafts have changed dramatically since the pandemic. Banks now charge large APRs, monthly charges, and interest on borrowing, and often those who are living within their overdraft feel the effects of this more than those who dip in and out.
Overdrafts are designed for emergency borrowing. If you are constantly in your overdraft, or going over your limit and incurring charges, it could be seen by your potential mortgage lender that you are living close to the edge of your finances and beyond your means.
It may be worthwhile looking into how you use your overdraft, if you are likely to clear it down, or if there is any other way you can reduce this debt prior to applying for your mortgage.
11 – Avoid delays with your application – be honest with your broker!
Your broker will fill out your application form for you, but it is important that the information you give them is correct.
They will sense check everything. Be sure to provide them with your full name, correct income, declare all of your outstanding debts (even credit cards you have £0 balances on), and give honest answers as to how much you spend and your lifestyle each month. This will help them assess your application quickly and eliminate any further queries being asked by the lender. In turn, this should speed up the process of your application, with few further queries or documents required.
Lenders typically have long wait times for documents to be assessed. This fluctuates within the market and can depend on how busy the lender is. However, on average, it takes 5-7 working days for documents to be assessed. It may take longer if some information is missing.
12 – Cut down on your spending (where possible.)
Your new lender may ask to see the last three months’ bank statements when assessing your mortgage application. This will be to check your income and expenditure.
As part of your application, your broker will go through your monthly budget and detail your current costs and your anticipated costs going forward with property ownership.
It’s worth keeping track of your spending in the months prior to applying for your mortgage, as this will show that your mortgage is indeed affordable and that you are keeping within your means.
In addition to keeping your immediate costs down, moving costs are high, whether that be solicitors’ fees, moving van fees, or stamp duty. So, it’s wise to save further where you can to help with these costs.
13 – Think about your deposit.
Your mortgage broker will go over your budget and how much you wish to and are able to spend on your deposit for the new property. It’s common knowledge that the bigger the deposit, the better the mortgage deal. This is because the lender has less money to lend to you, making you a lower risk.
Often, stress testing and lender internal credit scoring are lowered with larger deposit amounts too, so it can actually increase your chances of being accepted if you put down more.
It can be that an extra £100 or so on top of what you are already putting down will take you into the next bracket of lending, so 85% rather than 90%, which might mean that you qualify for a better product and have that higher chance of being accepted.
14 – Understand that not every lender is going to accept you.
With mortgages, it’s not a ‘one size fits all’ loan. Every lender is different. There are many types of lenders, including large high street banks, smaller building societies, or companies that deal in niche lending such as bridging or secondary secured loans.
Your specific needs, requirements for your mortgage, and circumstances – whether this be your income and how you earn it, your current credit status, or even where your deposit is coming from, may not fit each lender.
A whole of market broker such as the brokers we have here at Agentis will be able to tailor your mortgage to you. They will research your needs and how much you can borrow, ensuring you get the very best deal specific to you. You may not know the lender or have heard about them, but as long as the advice is correct and tailored to you, you can be sure that your broker will do their best to ensure you get that deal.
15 – If you are rejected, take a step back.
Before you apply again, your broker will highlight what has happened. The temptation is there to apply again and again with different lenders until you get the result you want, but it is wise to listen to your broker and their advice. The lender who has rejected the application will normally give a reason as to why this has happened. You may need to check something on your credit file, wait for a new payslip, or provide some extra information to get the decision overturned.
Contact us today to see how we can help!
