Applying for a mortgage may not be the most fun experience a person can have, but preparation really does pay off and simply avoiding these three basic mistakes will increase your chances of being accepted.
Failing to Show That You Can Manage Your Money
In the old days, it was possible to get a mortgage just by showing proof of your headline income. These days, however, lenders are obligated to check that you actually have a decent chance of meeting all your financial commitments each and every month and hence they tend to want evidence that you know how to manage your money.
Being able to provide a substantial deposit (at least 15%) is always a good move, however be aware that lenders are more likely to be impressed by evidence that you saved for that deposit yourself (or at least a substantial part of it) than by learning that you tapped into the bank of mum and dad. For similar reasons, it’s a good idea to minimise both your actual debt and your potential credit.
To clarify this last point, if you have numerous credit cards then you have the potential to use up the full balance on each of them. Therefore, if you’ve accumulated a stack of credit cards you never (or rarely) use, perhaps to take advantage of special offers, then think very seriously about closing them (which is also a good idea from a data-security perspective).
Failing to Manage Your Credit Record
First of all, you need to have a credit record to stand any chance of getting a mortgage. This means, rather ironically, that you are going to need to take on some form of debt, even if you don’t need to, just so that you can demonstrate your ability to pay it back. This may seem nonsensical, but that’s how the system works.
Most credit records are accurate most of the time, so it’s a good idea to call up your record with the three main agencies (Equifax, Experian and TransUnion UK formerly Callcredit) to check for mistakes. This will also give you the opportunity to see if there are any actions you could take to improve your credit score, such as making sure that you are on the electoral roll, ideally at the address from which you made your mortgage application.
Failing to Keep Your Life on an Even Keel
This may seem very unfair, but lenders are likely to be very wary of lending money to anyone who looks like they are going to experience a reduction in their income shortly after taking out a mortgage, i.e. during the period when the loan-to-vehicle ration is at its highest and, therefore, the lender is accepting the highest degree of risk.
While you can’t mislead your lender and must answer any questions fully and honestly, you don’t have to go out of your way to make yourself viewed as a higher-risk applicant. For example, if you are currently employed but thinking of going freelance, wait until after you have secured your mortgage before you make the change.