How to Prepare for a Mortgage
When it comes to preparing a mortgage application it is of paramount importance that you spend time taking the necessary steps prior to filing an application to mortgage lender, so that you give yourself the best chance of getting accepted.
You should start by researching the criteria that lenders typically assess when deciding whether or not to approve or decline an applicant, as it could end up being the very reasons why you get accepted for a mortgage or not, as well as the interest rates you receive. To help you with the process of preparing to get a mortgage, we have put together this guide that we advise you to follow so that your application is as strong as it possibly could be.
Checking Your Credit Report
It is always recommended to check your credit report with the three credit reference agencies in the country (Callcredit, Experian and Equifax) prior to making an application for a mortgage. The reason why you should check all three is that they all take into consideration slightly different criteria when making an assessment of your credit score, which can give you a balanced overview of what your credit rating is.
By checking your credit report, it can help you to see areas for improvement to increase your credit score, as this is something mortgage lenders will be focusing on when deciding to approve or decline your mortgage application for either a first or a second charge mortgage in the UK.
Get on the Electoral Register
Your credit report may indicate that you are not on the electoral register; if you move address, you have to update this information as otherwise you will no longer be on the register which can negatively impact your chance of being accepted for a mortgage. However, it is something that can easily be amended.
Credit and Debit Cards on File
Another relevant factor that a credit report will show is if you have unused, old accounts that are still on file that need to be closed, or to verify that any paid off credit card accounts have definitely been shown as settled on your credit file.
This is also a chance for you to see if there are inaccuracies, or out-of-date information on your credit report, as if that is the case, you can amend these details by contacting the agency and lender(s) in question. Incorrect information on your file could also negatively affect your chances of being approved for a mortgage, so it is important you take note of this.
What Other Information do Mortgage Lenders Look at?
It is not only your credit report that mortgage lenders will be taking into consideration when you apply for a mortgage. Whilst the list of criteria is not completely exhaustive, it can help to clarify the sort of things lenders will be assessing you on:
● Monthly outgoings
● Your employment status (as well as your partner’s if making a joint mortgage application)
● The amount you have asked to borrow from a lender
● Your salary
● The size of your deposit
● Your current employment status
● Your general spending habits
● The lender’s mortgage policy rules
Reduce Your Applications for Credit
Around six months to a year before making your mortgage application, you should make it a priority to reduce any unnecessary applications for credit that you make; you may decide not to make any such applications at all during this period. This includes everything from mobile phone plans and vehicle leasing to store cards, credit cards and loans.
By making too many credit applications over a short amount of time, it may signal alarm bells for mortgage lenders who could subsequently be concerned that you are in financial difficulty, making them less likely to approve you for a mortgage. Applying for various and numerous forms of credit over a short period of time tends to indicate many rejections and a desperation to get access to money, often a signal of someone in financial difficulty.
Assess Your Spending Habits
Around three to four months before you decide to make a mortgage application, take the time to sit down and assess your day to day, week to week and even month to month spending habits. This lets you see if there are any areas for improvement, as spending habits will be taken into consideration by lenders.
You should also see if there are ways you can decrease your spending so that you are able to ask for a lower deposit amount requirement and also make sure to clear any outstanding overdrafts.
Research Different Mortgages
Take the time to research the different mortgages available on the market. Speaking to your mortgage broker or adviser can be a way to help you decide, but you can also check online by looking at comparison websites. You may also wish to look at online mortgage calculators which can break down what mortgage type may suit you best depending on your circumstances and other determining factors.
Get a Few Mortgage Quotes
As a rule of thumb, you should aim to get at least three quotes from completely different mortgage lenders, so you can assess which lender would be right for you, and so you know that you are getting the very best deal suited to your personal circumstances.
Final Steps When Preparing for a Mortgage Application
If you have reached the point where you believe you have taken sufficient measures to make sure you have the best chances of being accepted for a mortgage, these will be the documents you will need to make the application:
- P60 form from your employer or if you are self-employed, or receive earnings from more than one source a SA302 tax return
- Council tax bills
- Insurance policy statements
- Utility bills from the last three months
- Current account bank statements for the last six months
- Passport (or your driving licence)
- Your last three months’ payslips
- Utility bills
- If you are self-employed, a statement of two to three years’ accounts