Increase Your Mortgage Chances
If you are thinking of buying a house then you will know all about the challenges that come with taking out a mortgage. It might seem like an absolutely impossible task and the banks usually have a million and one excuses as to why they should not approve you. Luckily there are a few tricks of the trade that we would like to share with you and they are not very difficult to understand. The advice we give you is so easy to implement and it will definitely help you in your journey to purchasing your dream home.
Not all lenders will like you
The first thing that you need to do (and you probably already know this by now) is that you should look attractive to lenders. This is where the trouble comes in. Not every lending company will look for the same criteria and you need to fit the box that they have designed for home owners. If you don’t, you get rejected – simple as that. If you feel like you fit in between, in the ‘grey’ area, then it could swing any way. Lenders usually look at the following criteria to see if you meet it:
- the size of the loan you are asking to take out
- how much you have already saved
- your employment status and income figures
- your credit card rating
- your expenditures
- your existing debt
If you pass the criteria, it still does not mean that you will be accepted. These companies are very strict with their screening processes. Don’t go see only one lender; it doesn’t mean that if one rejects you, another one will too. Apply for mortgage at as many places as you can and if more than one accepts you, then you have the choice of which one is the best.
Repay other debts
As you have seen above, lenders are going to ask about your debt and they are probably going to want to see statements. One way of getting this debt down is to repay it before you go and see the lender. Repaying things like retail accounts, overdraft accounts, and cell phone bills will increase your chances of fitting the criteria. The lenders are going to look at how much you spend per month trying to get rid of debt and they are going to assess whether or not you can afford the mortgage every month. If you are not using an account or credit card, rather close it. You can always apply for a new one after your mortgage has been approved.
Want mortgage? Always pay all your bills on time
This should be obvious to you. Every single payment that you miss when it comes to your bills will reflect on your credit rating – and it won’t look good. These skipped payments will count against you for at least one year and it does not go away until at least 6 years. An easy way to keep track of your bills is to set up direct debit orders so that it is automatically paid every month. If you can’t keep up with the bills per month, how are you going to keep up with a mortgage?
Your ex partner’s score can wreck yours
It is very important that you are aware of the implications of a joint account or credit if you are linked to someone else. If you are separated from them, de-link yourself as soon as possible. If you keep the account or credit linked and the other person skips payments or commits financial misdemeanours it automatically reflects badly on your record. Credit agencies do disassociate you from your ex-partner; all you have to do is contact them. Make sure that you check their credit history regularly if you are uncertain.
Minimize your spending before applying for a mortgage
We have already said that lenders will want to look at your expenditures before approving your mortgage and they will probably want to see statements. This is all part of the ‘stress test’ – this means that they would like to see if you will still be able to afford your mortgage payment if the rates went up to 6%. Lenders might ask you for your last 3 months’ bank statements and your payslips to see if your expenditure correlates with your income. It is worth it to limit your spending for the next 3 months so that you record looks a bit better, especially if you are applying for a large mortgage. You should also consider living frugally once you have actually purchased the house – there are a number of new running costs that might infiltrate your budget and give you some surprises at the end of the month. This way you will always have money to stop the holes.
Check your credit score before your lender does
One of the main things that you need to convince the lender of is that you can manage to pay back the mortgage and that you are a responsible adult who can work with money. One way of doing this is to check your own credit score and see if you have a good credit rating and payback history. Your credit file consists out of numerous things like credit cards, loans, overdrafts, utility payments and even some mobile payments. It covers all accounts opened during the last 6 years. The great thing is that you can check the history for free.
Prepare your paperwork to speed things up
Lenders need to see proof of income so that they can see if they are able to grant you your mortgage. It makes sense for you to gather all your paperwork in advance and send it in at one time so that you can get a faster answer. Many lenders won’t accept printed bank statements so you will need to go into the branches in order to obtain an original copy. Ask for these a few weeks in advance so that you have enough time if you should wait for it. Here is the paperwork that you should get ready:
- past 3 months’ bank statements
- last 3 months’ pay slips
- proof of bonuses or commission
- your latest tax form
- your last 3 years of accounts or tax returns
- proof of deposits
- ID documents
- proof of address
- a gift letter if you are receiving help from someone who will not be owning the home
Enlist the services of a good mortgage broker
A mortgage broker who knows his stuff will be able to help you before you go to consult a lender. They will be able to tell you exactly what to do and to expect in order to get your mortgage approved. A broker does thorough and updated searches of the market so that he can let you know of any new conditions you need to pertain to. He will also be able to take into consideration your personal financial situation and advise you according to that. Brokers may ask absurd fees for little advice so do your research first before you invest in their counsel.