Anne and David Allen have been saving with us for over 50 years. This is their story.
After the financial crash in 2008 banks and building societies tightened their lending criteria.
Due to this, borrowers found it more difficult to obtain a mortgage. In its 2018 mortgage survey, consumer watchdog Which? reported that one in six of those surveyed admitted they had had an application declined in the past; 41% were aged 18 – 24.
So, what can you do to boost your chances of being approved first time?
1. Check your credit score
First things first, you need to ensure your credit report is up to scratch before submitting an application. This is because lenders will undertake checks to ensure you would be a good customer.
A credit check will be taken to try and predict your future behaviour based on past experiences. So, if your credit score is unfit – you missed a series of mobile phone payments for example - lenders may decline your application.
You can check your credit score through a credit reference agency – Equifax or Experian for example. You shouldn’t be charged unless you opt for a premium account. Once you receive your report, go through it carefully to make sure it is correct. If it contains errors, contact the credit agency you used for further information.
2. Cut out excess spending
Although your mortgage will be secured against your home, lenders will want to make sure you can afford the monthly repayments.
To do this, your spending habits will be assessed, as will your income and your debt-to-income ratio. Lenders will ask to see at least three months of bank statements dated most recent before you undergo affordability checks to see if you are a reliable spender. If you are consistently overspending or living in an overdraft, it would be viewed negatively.
Read 'How to be super savvy when it comes to saving money' and 'Smart savings: how to get millennials out of the money conundrum' for saving tips and tricks.
3. Pay off any debts you can
Lenders will want to see how much debt you might currently have. This is so they can determine if you are going to be able to afford monthly repayments by establishing your spending habits.
If you have savings you could quickly put them towards paying off your debts before you apply – or at least reduce the amount of debt you have – this will work in your favour.
4. Avoid financial fluxes
Lenders do not like risky business; therefore, it is important to show that you would make a reliable and stable customer.
If you’re planning on any big life changes such as embarking on freelancing or changing your job, wait until you have secured your mortgage and more importantly, ensure you can make the monthly repayments.
5. Get your paperwork sorted
It may seem like a laborious task, but gathering and packaging up the documentation you need to produce for the lender will help streamline the mortgage application process.
Any discrepancies – for example if the address on your driving licence is different to that on the electoral role – could result in your application being delayed or even rejected. For this reason, it is worth checking the details on the documents you will produce are up-to-date, consistent and correct.
A mortgage adviser will review your documentats to determine affordability. For example, we require the following:
- Photo ID (current, full UK/foreign passport, for example)
- Proof of address (a utility bill less than three months old)
- Three months’ worth of payslips or three years’ worth of certified accounts if you’re self-employed
- Any credit commitments and/or outstanding debt
Lenders may still come back and ask for additional information, for instance, a first-time buyer may need to demonstrate that the deposit from their parents was a gift and not a loan.
You can find further information in our 'Mortgages explained' booklet.
YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.