We’ve pulled together 10 top tips that will help give you the best chance of being accepted for a home loan.
1. Save the biggest deposit you can
Mortgage providers reserve their lowest interest rates for people with large deposits.
That means most of the top deals on the market are limited to buyers who can put down between 35% and 40% of a property’s value, while those with only 10% to put down will have to pay a higher rate.
In other words, save up as much deposit as you possibly can. If you’re a first-time buyer, a Help to Buy ISA can be a good starting point.
2. Avoid surprises by knowing your credit score
You will need a good credit score to qualify for the best mortgage deals. You can check yours for free with MoneySuperMarket’s Credit Monitor or MoneySavingExpert’s Credit Club. Both of these services are completely free and use a ‘soft check’, so they won’t affect your credit score.
Checking your credit score means you can be sure to avoid any surprises and it will also give you time to correct any inaccuracies should you find any.
3. Pay off unsecured debts and close any unused accounts
When deciding whether or not to take you on as a customer, mortgage lenders will look at the total amount of credit available to you – as well as the amount you owe.
So clear as much of your debt as possible and close down any accounts you no longer use. Otherwise, lenders may be concerned about your ability to keep up with your mortgage repayments.
4. Get on the electoral roll and update your address
Many companies use the electoral roll to verify your identity, so your mortgage application may well be refused if you are not registered on the electoral roll at your current address.
This is easily remedied, though. Just contact your Local Authority and ask for a registration form or sign up online.
To avoid any issues, it also makes sense to ensure the address the credit agencies have for you is up-to-date.
5. Avoid unusual properties
Mortgage lenders like knowing that they can get their money back should you default on your repayments, for example.
Consequently, they are often less willing to lend against properties that are deemed to be unusual and may therefore prove harder to sell on.
Properties in this category – and therefore best avoided – include flats above commercial premises such as cafes and bars, old or unusual buildings and homes built using non-standard construction materials such as concrete or steel.
6. Be prepared with all documents
No mortgage lender will take you on as a customer unless you can prove who you are, so make sure you have an up-to-date passport and that the address on your driving licence is correct.
Other documents you will need to provide include a recent letter – from say a bank or utility company – that proves your address.
Employed workers will also have to obtain their bank statements and payslips for the last three months and their P60s for the last two years, while those who receive a bonus must provide evidence of this too.
The accounts or HR department at your company should be able to provide duplicates if necessary.
If you receive any other income, such as Child Benefit, you’ll also need documents to prove this.
7. Collect evidence of self-employed earnings
Self-employed workers make lenders nervous, and must provide even more evidence of their earnings than those with full-time jobs as a result.
If you are self-employed, you will therefore need an SA302 form relating to the last two to three years from HMRC, or your full accounts for the last two to three years.
8. Know in advance the kind of mortgage you want
Mortgages come in all shapes and sizes.
You therefore need to decide whether you want the security of a fixed rate, for example – but that will also lock you in for the whole term – or opt for a tracker deal which may not come with tie-ins and could even start off cheaper, but will rise in line with the Bank of England base rate.
Mortgage lenders will factor in potential interest rate rises when working out your affordability, but if you have any concerns that you wouldn’t be able to manage an increase in repayments, a fixed rate deal is the safer option.
9. Shop around or use a broker
Once you have decided what type of mortgage you want, the next step is to make sure that you get the best possible deal for your circumstances. After all, finding the cheapest deal could save you thousands, if not tens of thousands, of pounds over a 25-year term.
Our mortgage channel at MoneySuperMarket gives you immediate access to details of all the top deals for everyone from cash-strapped first-time buyers to movers with deposits of £100,000 or more.
However, it also makes sense to check with a broker as they can offer some deals that are not available direct. London & Country’s advice service will help you find the right mortgage, giving you peace of mind that you made the right choice for your own particular circumstances.
10. Don’t chop and change your application
Once you’ve started your mortgage application, don’t start playing about with it by changing figures (for example, if you decide you want to borrow more money) as this can cause hold ups.
Not only could the lender refuse to give you the extra money, it may decide it’s no longer prepared to lend to you at all.
Your home may be repossessed if you do not keep up repayments on your mortgage.