Since the start of the economic downturn it has certainly become more difficult to get approved for a mortgage, but things really aren’t as bleak as some of the naysayers in the media would have you believe.
Yes, lenders may be a little choosier than before and options like self-certification are now seemingly things of the past, but if your financial circumstances are good enough there will still be a mortgage deal out there for you.
Here we look at some of the things which can help or hinder your chances of getting approved.
Length of employment
If you regularly change jobs then the chance of you getting a mortgage will be somewhat diminished.
During the application stage your mortgage adviser will be required to document the length of time you have been with your current employer. As a rule of thumb, most lenders will require you to have been in the job for at least three months and to have passed any probationary periods.
However, for some lenders the preferred employment period is 12 months.
This means that if you are looking to change jobs, it is often a good idea to shelve your plans until after you have got your mortgage through and have settled in your new home.
Having other debts
It would be easy to say that having no debts will make you a better proposition to a mortgage lender, but in fact that statement would be very wrong.
Having small and manageable debts, such as a credit card with a very low balance helps to boost your credit score and demonstrates to a lender that you can be responsible when it comes to money management.
If you’ve never had any debts, then there is no evidence to go on and lending to you could be seen as something of a punt.
However, having large or excessive debts will have a detrimental effect on your application. Indeed, if you are often hovering close your limits on loans and credit cards then a lender can hold this against you.
What’s on my credit file?
It’s a question that in truth very few people know the answer to. Most people will only check their credit report once in a blue moon or if they have an issue flagged to them.
But when deciding to proceed with a mortgage application, it is something you should do immediately.
Unfortunately, credit reference files are not always exact and mistakes on yours can mean that you are declined for a mortgage. Before giving your adviser the green light to submit your application, you should check through each entry on your report and ensure that any mistake inaccuracies are rectified.
You can obtain a copy of your file by contacting one of the main reference agencies (Experian, Equifax and Call Credit). Typically a small admin fee will apply.
Save, save, save
It may be easier said than done, but one of the best ways to increase your mortgage prospects is by saving up as big a deposit as possible.
The bigger the deposit you put down the lower the risk you are to the lender. Due to this they will often offer you better priced products and lower fees.
Lenders asking for bigger deposits is one of the key reasons why many potential first time buyers are finding it almost impossible to get a foot on the property ladder.
In the past decade many people took their first mortgage out on a 95 or even 100 per cent basis. However, you’ve got about as much chance of seeing Lord Lucan as you have of getting borrowing on that kind of basis today.
But that doesn’t mean that there are not some high LTV (loan to value) products on the market. At present HSBC, the Post Office and the Yorkshire Building Society all have products available up to 90 per cent LTV.
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