If you’re thinking about getting a mortgage, you should be aware of the factors that affect your eligibility as this can be critical in whether you are accepted or not
If you are looking to get onto the property ladder then you will need to understand what lenders are looking for when applying for a mortgage.
There is a whole range of mortgages on offer in the UK so you have a fair few options to choose from - the trick is getting accepted for it and to do this, you will need to face the lender prepared. If you’re thinking about getting a mortgage, you should be aware of the factors that affect your eligibility as this can be critical in whether you are accepted or not. These can include your credit score, length of time in your current job, current debts, whether you’re self-employed or not, and the size of your deposit.
Although it may sound daunting, the good news is there’s plenty you can do to improve your chances of having your mortgage application accepted. Here are four ways you can up your chance of getting a mortgage.
Save a big deposit
The more money you save for a mortgage deposit the better as it means you will borrow less when buying your home. Alongside this, you will also be able to access cheaper mortgage deals. Typically, you should try and save a 10% deposit - so 10% of a property's overall price - this means if the property is £250,000, a 10% deposit would be £25,000.
It is possible to find a mortgage with a deposit of just 5% but these deals tend to have the highest interest rates and have stricter criteria for eligibility. A 25% deposit is where you will start to see more preferential interest rates opening up.
Check your credit score
Your credit score represents how you manage bills, debts, and payments and helps determine whether you are a responsible borrower. There are three credit reference agencies in the UK which are Equifax, Experian and TransUnion and each one can have a different score.
In general, the higher your credit score the more likely you are going to be accepted for credit. There isn't a minimum score you need to be accepted for a house, but if your credit score is higher, then you will likely be offered better mortgage deals such as lower interest rates - although other factors such as the size of your deposit also affect the rates you're offered.
If you are looking to buy in the future, you should start by seeing what your credit score is and you can check it for free at each of the three main credit agencies. However, it is important to be aware that your credit score isn't the only factor they look at. Alongside your credit history, they will look at how much you earn, how much goes out each month, and other fixed costs such as childcare and Council Tax.
If you can show them you can afford your monthly mortgage repayments, even if your life situation changes or if interest rates rise, you may still be able to get a mortgage if your credit score isn't the best.
Try and clear your debts
If you are planning to submit a mortgage application, the last thing lenders want to see is that you have some outstanding loans or owe cash on credit cards. Before putting in your application today you should try and reduce any of the debts you have as this will show that you can manage your money responsibly. According to Barclays, whatever debt you have - showing you’ve got a steady hand, repay on time and keep your spending under control, will go a long way towards proving you’re a good bet for a mortgage.
Pay to get help
If you’re struggling to find the right mortgage deal, or you don’t know what you’d be eligible for or how much you can borrow, it might be a good idea to enlist the help of a mortgage broker. Having a broker can particularly be useful if you are self-employed or have variable earnings. A good mortgage broker will know the market and potentially make it a smoother process for you and they could also help you save money as they are more likely able to find the best - and cheapest deal - that suits you.
You will need to pay for their service. There are different mortgage broker fees, some will receive a commission paid for by the lender, some will charge a set fee per hour alongside interest on top, and some will do both.
If you want to get a mortgage broker, then you should find one who is authorised and regulated by the Financial Conduct Authority (FCA). The FCA website lets you search for regulated advisers such as bank or building societies, so check the list before you bring a broker on board.
