Stop gambling and get a credit card: how to improve your chances of getting a mortgage
Building up a big enough deposit to get on the housing ladder is the first challenge for any wannabe homeowner. Once that obstacle’s out of the way, the next step is getting a mortgage.
Unfortunately, this isn’t always as easy as it seems. Research by the Nottingham Building Society found a third of people who had tried and failed to buy or sell in the past five years saw their deal fall through because of problems securing a mortgage.
Lenders have pretty strict criteria when it comes to who they hand money out to and tougher regulation, which came into force in 2014, means you’ll have to tick all the right boxes – and there are plenty of them.
Lenders now want to know as much detail as possible about your income, outgoings and lifestyle before they dole out any cash.
To increase your chances of getting a mortgage, there are certain steps you can take.
Get the RIGHT paperwork sorted in advance
Your bank or building society will want to see a lot of paperwork when you apply for your first mortgage. Making a checklist of what you need will help avoid unnecessary delays down the line.
Andrew Montlake, director at Coreco mortgage brokers, says: “The real key to getting your first mortgage is preparation and to ensure a smooth process, it really is all about paperwork. Getting it right from day one can literally save days.”
Lenders like to see evidence of your address history for the past three years with no gaps, your last three months’ payslips and your last P60 or three years’ accounts.
They’ll also want a minimum of three months’ bank statements and full details of any loans or credit cards you have.
Don’t forget to disclose your student loan if you have one.
Make sure everything is linked to your current address
That includes your bank accounts, credit cards, mobile phone – any form of financial commitment.
Take out a credit card
You may think being debt free will work in your favour but lenders will want to know you’re trustworthy and that you pay your creditors on time. This can be difficult to prove if you’ve never had a mortgage. One option is to take out a credit card.
“Lenders will want to see some evidence of managing debt,” says Mark Harris, chief executive of mortgage broker SPF Private Clients.
“So take out a credit card before applying for a mortgage and ideally pay off the balance in full each month.”
Check your credit score
And do it as early as possible! “Lenders will look at this to ensure you have a history of taking on debt and that you pay your creditors on time,” says Harris.
There are various sites that offer credit reports such as Experian, Noddle and Clearscore. And there are a number of ways to improve your score. Read: Ten ways to boost your credit score
“Ensuring your credit report is up to date and accurate can literally be the difference between passing and failing lending decisions as for first time buyers, especially those with a lower deposit, credit score is key,” says Lea Karasavvas, managing director of Prolific Mortgage Finance.
If there are any mistakes on your credit score, get them sorted as soon as possible.
Cut back on spending and stop gambling
Lenders will scrutinise your spending habits so you should start monitoring your outgoings three to six months before applying for a mortgage.
“Keep your bank account operating in credit or within its limit and stop high levels of discretionary spending,” says Adrian Anderson, director of mortgage broker Anderson Harris.
“You’ll want to present yourself in the best possible way.”
It’s a good idea to let go of that pricey gym membership you don’t use. And Montlake suggests laying off the betting sites for “at least three months”.
Get on the electoral register
This could be the easiest but also most important step on your journey to getting your mortgage approved.
Lenders will want to check your identity and that you are who you say you are and will use the electoral roll to do so.
If you’re not on it, this is a straight decline for some lenders.
To get yourself on the vote register, visit https://www.gov.uk/register-to-vote