If you are preparing to buy your first home this year, you've doubtless been saving hard to scrape together the minimum 10% deposit required by these days by mortgage lenders - no easy feat at more than £16,000 on an average-priced property.
A glance at the '10% deposit' mortgage tables will reveal a number of lenders offering deals in return for your efforts including HSBC, Santander and Leeds and Chelsea building societies. The cold reality is, however, that even if you have saved up enough, you may still fail to meet mortgage lenders' strict criteria.
The reality of 90% mortgages
According to experts, the vast majority of mortgage applicants with the minimum 10% deposit are turned down as, regardless of what banks and building societies advertise, the loans are still considered high risk and lenders want to limit their exposure to this.
David Hollingworth at broker London & Country, said: "Just because a lender says it offers a 90% mortgage, doesn't mean it has to give it to you. There are still very few deals available at that borrowing level which means criteria are especially tight."
Whether you are shown the red or green light for your 10% deposit, will hinge mainly on your credit score. But, while the big banks will access your credit report from one or more of the UK's credit reference agencies, they also employ their own scoring system to run alongside it - and this is the main problem first-timers face, says Hollingworth.
"Not only do credit scoring models vary between lenders, applicants never get to see them so the process is not at all transparent. What's more, the lender doesn't have to explain why it has turned you down - it's enough that you simply don't meet its own level of credit score for that application."
Taking matters into your own hands
However, would-be first-time buyers don't have to be left entirely to fight an invisible enemy. There are still active measures you can take to maximise your chances of being accepted for a 90% loan on your first application.
Get a copy of your credit report:
The first step is to check your own credit report which will enable you to see what the lender is going to see when you apply for your mortgage. If there is a blip on your credit report that you want to dispute or explain, you can add a 'notice of correction' free-of-charge, which all lenders are obliged to consider.
Your credit report is easy to obtain from one of the credit reference agencies, the largest of which are Experian and Equifax. Both of these agencies offers a 30-day free trial for unlimited online access to your report but costs beyond this vary. You can compare what's available at Moneysupermarket.com's credit reporting channel.
Stay in your job a while longer:
Banks and building societies are looking for security in a borrower - and one of the most telling signs is how long you have been employed. Generally, lenders will get cold feet if you have not been with your current company for at least 18 months, so it might be worth holding off applying until your feet are more firmly under the table.
Register on the electoral roll:
If you register to be on the electoral roll each time you move home, it will help to confirm your identity and address history - both of which will make lenders happier to part with their cash. Being on the electoral roll will also potentially improve your credit score.
Don't get application-happy:
Applying erratically to a series of different lenders if you are turned down by the first is a big mistake. Each bank can trace your footsteps on your credit file which doesn't look good to the next one. If you think you may encounter problems with your mortgage application, it might be a good idea to enlist the help of a mortgage broker or independent financial adviser who is likely to know the quickest and best route to mortgage success for your circumstances.
Continue saving in the meantime:
One thing you will never regret doing during this process is saving too much. So if you do have trouble being accepted for the loan, don't be disheartened and eat into your deposit funds. Instead, raise your game and save even harder.
David Hollingworth said: "It might not seem fair, but if you can stump up 15% deposit, you will suddenly find it's much easier to be accepted for a mortgage; what's more you will have a lot more choice and access to cheaper rates."
The difference 15% makes
For example, the cheapest two-year fixed rate in exchange for a 10% deposit is priced at 4.49% from Chelsea Building Society, but if you can lay your hands on a 15% deposit, the Hanley Economic Building Society is offering an equivalent deal at the lower rate of 3.34%.
On a 25-year repayment mortgage of £150,000, this will save you nearly £95 a month - further unfortunate evidence that the more money you have, the cheaper your mortgage will cost. But, of course, every first-time buyer has to start somewhere...
Please note: Any rates or deals mentioned in this article were available at the time of writing.
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