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Whether you are buying your first home, moving home or you're simply shopping around the Mortgage market for a better deal, applying for a Mortgage may be at the top of your to do list.
However, before you make a Mortgage application take a look at our top tips to make sure you give your application the greatest chance of being successful
Check out your credit record first
When you apply for a Mortgage, your potential lender will run a credit check on you to ensure you do not have a history of bad credit. It is likely that the lender will be looking for things like missed Mortgage payments, defautls on credit cards, CCJs or Debt Management plans. If your credit record contains any of these things, your potential lender could see it as a signal that lending to you will be high risk. This may well result in your application being declined
There are other things which affect your credit rating and here are the biggest ones:
1) The Electoral Roll - If you are not on the Electoral Roll, this is seen as a negative by Mortgage lenders
2) Associated Debt - For example, if someone has lived in your property who has a bad credit rating , their credit rating could be affecting yours. If you believe this to be the case you can disassociate yourself with this person by getting in touch with Experian or Equifax
3) High Borrowing Facilities - If you have credit cards, store cards, overdrafts, even if you don't use them, you have the potential to. Many Mortgage lenders will see your ability to borrow money at will from other parties as risky and this could lead to them turning you down
Most Mortgage companies use either Equifax or Experian as their credit reference agencies and you can order a copy of your credit file from either company for just a few pounds.
Getting a copy of your credit rating before you apply will enable you to correct any errors on the report, see where you stand and also to find a Mortgage lender whose lending criteria fits your circumstances
Check the Mortgage Lender's Credit Policy/Lending Criteria before you apply
Every Mortgage lender will have a strict lending policy that they have to adhere to. This policy tells the underwritier who is looking at your application whether you meet the criteria and whether they should approve your application.
Each Mortgage lender's credit policy or lending criteria is unique to them. Although, you will find that certain bits of the criteria will be standard to most lenders.
If you have a specific concern about your application and you are unsure of whether the Mortgage lender would see this concern as a problem then find out before you apply.
You can telephone the Mortgage lender and ask to speak with someone in regards to their lending criteria, if possible an underwriter. Tell the person you speak to your concern and ask them to check with an underwriter to see if this will present a problem if you decide to apply.
By checking the lenders lending criteria before you apply, you can avoid having your application declined and find a lender whose lending criteria fits in with your circumstances
Your Employment
The lender will wish to know about your employment, specifically how long you have worked for your current employer and whether your employment with them is permanent. Some lenders may decline your application if you are not permanent, have just started a new job and are in a probationary period or if you are self-employed and cannot produce at least two years accounts.
Once again check the lender's lending criteria before applying. By waiting until you are out of the probationary period or can produce accounts, you could save yourself being declined.
Declaring Your Income
When applying for a Mortgage many people make the mistake of giving the lender an estimate of their annual basic income and assuming that this is okay. This is not okay
Your potential Mortgage lender needs to know exactly what your income is so don't guess. After you tell them your income it is likely that the lender will ask for your bank statements to verify whether what you have said is both true and accurate. If they find it isn't, it could well lead to your application being declined.
The other big mistake that most people make when declaring their income is forgetting to mention things like their bonus, shift allowance or benefits. The rule here is if you get income from somewhere, mention it. If the Mortgage lender can't accept it as part of your application they will tell you.
Every day people have their Mortgage application declined due to a lack of income and unfortunately in some cases this situation could have been avoided if the person applying had remembered to mention all of their sources of income
Your other financial commitments
The lender will want to know about any financial commitments you have elsewhere. This is likely to include any credit cards, store cards, overdrafts or loans. Before you apply for a Mortgage get a list of all your financial commitments together. The lender will need to know who the commitments are to, how much is outstanding on each one and how much each one costs you per month.
If you intend to pay off any of your current commitments with the money you get from your Mortgage, then let the lender know, they can take it into account.
When your lender does a credit check on you, they will be able to see everything you have outstanding elsewhere. If you forget to mention something, the Mortgage lender may decline your application.
If you are declined
Speak to the underwriter - If you are declined the most important thing to do first is to find out why. If possible speak to the underwriter who dealt with your case and get as much information as possible. If you can't speak with an underwriter, ask the person you are speaking with to do so on your behalf and find out why the decision was made
Find out if it's worth appealing the decision - If you have been declined it could be because you didn't give the underwriter a true picture of your situation. Many people forget to mention other income they have or to mention that they intend to pay their debts off using some of the money the lender gives them. If this is the case or if you feel there is something the underwriter hasn't taken into account, make them aware of it and ask them if they feel it would lead to a reversal of the decision.
Don't keep applying with different lenders - Every time you apply for a Mortgage you are credit scored and if you keep applying to different lenders, all of which can see your credit rating and see how many footprints from other lenders are in it, not only is it likely that your application will continue to be declines, it is very likely to have a very negative impact on your credit rating.
Before making any more applications do some research. As suggested above, ring around lenders and find out if they would also decline people in your situation before applying.
If you were declined due to bad credit - Speak to as many different lenders as you can and ask them whether the decline people in your situation. Also, ask if time will make a difference. For example, if you had bad credit in the past, but have now resolved the situation, the lender may consider your application after a certain amount of time has passed. Find out for each lender exactly how long this is.
Speak with an IFA - An IFA has access to the whole of the Mortgage market and can research any lender's lending criteria on your behalf. If you find an IFA with years of experience or who specialises in adverse credit Mortgages, you may find they can suggest a lender who will accept your application
Find an Independent Financial adviser
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