6 tips to help your mortgage application get approved
As a first time home buyer, the process of acquiring a home can be both exciting and nerve-wracking. If you’re planning on taking a mortgage, you need to understand what lenders look for, having the right deposit savings, and the amount of deposit you need to get approved.
While this process can be tedious, we’re here to make this easier for you. Below is everything you need to know about the mortgage application process and tips for getting approval.
Criteria used for mortgage approval in the UK
Lenders consider several factors before getting you approved for a mortgage. Some of the factors they look for include how much you can afford to borrow, the amount of deposit you have, and your credit history. You’ll also need to provide documents like your ID, proof of income, proof of home address, and your bank or credit card statements.
Tips to get approved for a mortgage
Below are some tips if you’re looking to get a mortgage approved in the UK.
1. Find out what lenders require
Lenders will look at your source of income to determine if you can pay off the loan. Most will loan you up to four times your salary. They also look at any existing debts and outgoings to see if you’re a high risk.
In some cases where they need to find out if you’re a good fit, they may conduct stress tests. These tests also consider changes to your lifestyle, and possible interest rate rises. The lender could reject your loan application or limit the amount you borrow if he concludes that you won’t be able to afford to pay off the loan.
2. Determine the amount you can afford
It’s essential to determine how much you can afford before you even begin house hunting. Remember that the higher your deposit, the better your chances of getting favourable interest rates. The lender evaluates your current expenses and income to determine if you can meet your mortgage repayments.
3. Check your credit score
A credit score is what tells the lender if you’re a reliable borrower. You can get your credit score information for free on sites like Clearscore and Noddle. Check your report for errors as any incorrect information could lessen your chances of approval.
Having a poor credit score should limit you from applying for a mortgage as there are bad credit mortgages available for people with a bankruptcy on their records or poor financial history. The only disadvantage is that you’ll have a restricted list of lenders.
4. Have your documents prepared in advance
Failing to prepare your documents in advance could get your mortgage application is delayed or rejected. Ensure that you have all the required documents for your mortgage application when planning to apply for the home loan.
The documents needed for your mortgage application are your ID, proof of income in the form of payslips, proof of home addresses like utility bills, and your outgoings like your credit card and bank statements.
Note that the documents asked for depends on different lenders. Consult your mortgage advisor to know what documentation to prepare in advance.
5. Consider working with a mortgage broker
The right mortgage broker knows the market and, most importantly, knows your market. Their experience dealing with several lenders means they understand what’s required by the lenders and how to get the best rates in the market.
You’ll find it convenient working with an experienced broker who knows how to match you to the best lender based on your income and credit history. Moreover, they provide tailored and personalized advice to help you increase your chances of approval.
6. Stay away from debt and avoiding acquiring any new debt
While you don’t need a zero balance on your credit cards to qualify for a mortgage, the lesser your debts, the higher your chances of approval.
Lenders will look at your debt-to-income ratio before approving you for a home loan. A lot of credit card debt could indicate that you’re high risk, which means your application could be denied, or you could be offered a lower mortgage.
You can choose to pay off your consumer debt before making an application, as this lowers your debt-to-income ratio. It’s vital to also avoid new debt while applying for the mortgage as lenders recheck your credit before closing the mortgage application. Don’t make any huge purchases, like buying home appliances or buying a new car, with your credit card during the mortgage process.
You can get your mortgage approved in a week or two if your application is straightforward. However, if some details are missing, the process could take longer. In the UK, every lender will divide the application into an agreement and a full underwritten application leading to a mortgage offer.
If you feel that the mortgage application process is too complicated, you might consider working with an experienced mortgage broker. The right broker can get you a mortgage deal that fits your current situation.