Improve your odds of getting your mortgage loan approved
Fri 03 May 2019
Are you thinking of applying for a mortgage soon? Navigating the mortgage application process can be difficult, with lenders having different criteria for assessing mortgage applications. Getting your mortgage loan approved depends on a range of factors including:
- The size of loan you want to take out
- How much you've saved as a deposit
- Your employment status and income
- Your credit rating
- Your outgoings
- Your existing debt
According to a Which? survey, one in six mortgage holders surveyed have been rejected for a mortgage. We take a look at what steps you can take to boost your chances of getting your mortgage application approved.
When should you start looking for a mortgage deal?
New house purchase - If you’re looking to buy a house then the earlier the better! Start the process and speak to an advisor before viewing properties. That way you’ll not only know how much you can afford to borrow, but it could identify any hiccups early on to prevent any delays in getting a mortgage. You could also be at an advantage compared to other buyers if you have a mortgage already agreed in principle.
Remortgaging - You should generally start looking for a remortgage deal no later than three months before your current deal ends. Moving to a new lender could take up to two months so you need to give yourself time to consider your options.
How can you improve your odds?
It’s not easy securing a home loan as lenders apply affordability rules to ensure they offer mortgages that people can afford. Carl Robbins Regional Mortgages Manager at Police Mutual, has shared the following tips to boost your mortgage chances.
What are the main reasons for a mortgage application being declined?
- Poor credit history
- Too many credit applications
- Not on the electoral role
- Too much debt
- Insufficient funds
Get your finances in order
you need to be as financially attractive to lenders as possible. So getting your finances in order and reviewing your spending habits up to 12 months before you apply for a mortgage will help.
Cut back on your spending as Lenders will ask for detail about your outgoings and are likely to ask to see your bank statements to verify what you've told them. This is to make sure you'd still be able to afford your mortgage if your circumstances changed. Your application could be rejected if you fail to show you’re managing your money responsibly.
Manage your credit and pay bills off on time
Pay your credit cards and bills on time. Any missed payments can remain on your credit file for six years, so keeping up payments is a must. Setting up direct debit payments for credit cards can avoid the risk of you missing a payment.
Check your credit report
Lenders will check your credit report(s) to see if you’ve got a good repayment history. Your report lists your credit cards, overdrafts, loans, mortgages, mobile phones and some utility payments for all accounts opened within the last 6 years. You can check your credit file at all of the three main credit agencies – Equifax, Call Credit & Experian.
If you’ve applied for joint credit, such as a mortgage or bank account, then you will be financially linked to someone else. If you’ve since separated or have nothing to do with them then they could be affecting your credit score, so you’ll need to update your file. If you spot anything wrong with your credit file then you need to request an amendment.
Are you registered to vote?
If you’re not on the electoral register then your chances of getting a mortgage could be reduced. Lenders use the register to carry out financial checks and to confirm where you say you're living. Your credit report will tell you if you’re on the electoral role. If you’re not you can register here.
Don't apply for credit 6 months before applying for a mortgage
If you apply for a loan, credit card, utility contract or even a mobile phone then a search may be registered on your credit report, even if you don’t take out the contract. If your credit file shows multiple searches then this can reduce your ability to obtain credit. If you’ve had a payday loan in the last 12 months then you could be declined for a mortgage.
Put down the extra on top of your deposit
All mortgages have a maximum loan-to-value (the amount you borrow compared to what the property's worth). Keeping the loan-to-value as low as possible – for example putting down a little bit more than the minimum deposit required - can make you more attractive to the lender.
Get your paperwork organised
Lenders will need to see proof of your income before they can offer a mortgage so getting it ready in advance could speed the process up. Your lender may want to see any or all of:
- Your last three months' payslips
- Your last three months' bank statements
- Proof of bonuses/commission
- Your latest P60 tax form (showing income and tax paid from each tax year)
- Proof of deposits (eg, savings account statements)
- ID documents (usually a passport)
- A gift letter. If you're getting deposit help, the lender needs to know it is a gift (not a loan), and that the giver won't part own the home.
If you’re looking for a mortgage then talk to our expert advisors who have access to the whole of the market and will personally guide you through the process from enquiry to completion.
We’ll take the stress out of finding the right mortgage for you.
Mortgage Excellence Plc, trading as Police Mutual, is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. 03527577. Registered office: Alexandra House, Queen Street, Lichfield, Staffordshire WS13 6QS.
Type of article: Articles
Category: Owning a house
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