So, you're ready to get on the property ladder, but the whole "getting a mortgage" thing is looming like a giant financial uphill battle. Fear not! With a little preparation and some handy tips, you can boost your chances of getting that all-important mortgage approval. Here are 10 tips to improve your chances of getting a mortgage…
Check Your Credit Score (AKA Know Thyself)
First things first—have you met your credit score? Think of it as your financial report card. Lenders will use it to assess your financial discipline and track record. Sign up to check your credit score (there are free services and free trials available through Clearscore, Equifax, Experian and more!), and if it’s a little underwhelming, you’ll know where to start improving.
Your credit report is essentially a list of all the accounts you’ve had active over the past 6 years including credit cards, loans, some utilities, bank accounts, mortgages and buy-now-pay-later agreements.
Fix Any Credit Mistakes (Yes, They Do Happen)
Found a mysterious £500 phone bill from 2017 that you definitely didn’t rack up? Mistakes on credit reports happen more often than you’d think. Make sure there are no errors dragging your score down. Think of it as cleaning up your financial reputation—your future mortgage depends on it.
If you have a genuine and unfair error on your credit file, you can contest it with the lender and have it cleared. If it’s a default, you can try to negotiate with the lender to repay the debt on condition that it’s wiped off your credit file. Another option may be to give it time to heal – although defaults stay on your file for 6 years, the older they are, the less impact they will have on your mortgage application.
Get Your Finances Organized (Time to Adult)
Lenders love order. They want to see that your finances are steady and reliable. Have a tidy summary of your income, outgoings, and savings. If your bank statements currently look like a chaotic shopping spree, it’s time to Marie Kondo your spending habits. Start with reducing those late-night Amazon binges (unless it’s for cat toys—those are totally justifiable).
Always pay your bills on time and stay out of overdraft! Lenders will want to see your last few months’ worth of bank statements to check you’re good for the mortgage.
Cut Old Ties (Time to Move Onto a Brighter Financial Future)
Financial associations show up on your credit file – if you’ve had a joint ‘house’ account with an old flat mate, or a joint bills with an old flame, these will be recorded. Any late payments or money mishaps made by them could reflect badly on you. Contact the credit agencies and ask for a notice of ‘disassociation’ to have them delinked. It’s time to move on!
While you're at it, close down unused bank, credit and store card facilities – open credit, even if there is no balance, can negatively affect your credit score.
Save for a Bigger Deposit (Because Size Matters)
The bigger your deposit, the better your chances of getting a mortgage. Lenders feel more comfortable when you’ve got more skin in the game. Plus, a larger deposit could mean lower interest rates. So maybe skip the daily Starbucks run and start stashing those pennies. Your future home will taste just as good as that flat white.
Interest-rates usually decrease in percentage loan-to-value (LTV) bands - for example you’re likely to get a better interest rate at 80% loan-to-value (with a 20% deposit) than 81%, so stashing an extra £100 per month while you save your deposit could save you even more on your monthly repayments in the long run!
Keep a Stable Job (Because Lenders Like Predictability)
Job-hopping may make you the most interesting person at a dinner party, but it’s not what lenders want to see. They prefer a steady income, ideally from at least six months in your current job. So, if you're considering a mid-life career change to professional skydiver, maybe hold off until after the mortgage approval.
Get your paperwork in order – in addition to photographic ID and bank statements, you’ll have to evidence your income with 3 months payslips, proof of bonuses/commission, your last 2-3 years tax returns or P60 forms.
Cut Down on Debt (Lenders Hate It)
Lenders aren’t fans of too much debt. If you’ve got credit card balances or loans, it’s a good idea to start paying them down. They want to see that you’re not juggling too many financial commitments. And no, "financing that new TV" doesn’t count as an emergency—at least not in the eyes of the bank!
Many lenders now include buy-now-pay-later commitments into their analysis of your finances, so avoid putting all your ASOS purchases on Klarna!
If you can’t repay all your debts, try to keep them below 50% of your available credit. Lenders will look at the amount of credit in use compared to the amount of credit you have available – for example, if you have £500 overdraft limit and a credit card with £2500 available, but both are maxed out, this will appear as though you’re at the edge of your finances. Try to keep your debt at 25% of your available credit.
Avoid Big Purchases Pre-Approval (Put the Jet Ski on Hold)
Tempting as it may be, now is not the time to buy a brand new car, jet ski, or a lifetime supply of hot tubs. Big purchases that require credit can negatively impact your application, so save the splurge for after you’ve got the keys in your hand.
Keep a Lid on Your Outgoings (Maybe Don't Subscribe to Everything)
Lenders will look at your spending habits, and they don’t want to see that all your cash is going toward takeout and Netflix subscriptions. Keep your monthly outgoings as low as possible, at least until you’ve passed the mortgage application hurdle. Those 14 streaming services? Time to pick a favourite. The more disposable cash you can evidence, the more you’ll be likely to borrow, so every unspent penny helps.
Get on the Electoral Roll (For Bonus Brownie Points)
Surprisingly, being registered to vote helps improve your mortgage chances. Lenders use the electoral roll to verify your identity and address, so make sure you’re signed up. Plus, voting gives you a say in who runs the country, so it’s a win-win!
Final Thoughts: Get Ready to Be Mortgage-Approved!
With these 10 tips in your back pocket, you’ll be in tip-top shape to take on the mortgage application process. It’s all about being prepared, keeping your finances in check, and showing lenders that you’ve got your act together. Sure, it’s not the most glamorous part of buying a house, but the satisfaction of getting that approval? Totally worth it.