Buying a home isn’t an easy task, and it’s everyone’s dream to one day own a home. The easiest way to achieve this dream is to take a mortgage. Getting a mortgage though it’s viewed by many as the default way to finance a home, sometimes it may seem like climbing Everest. This is one of the biggest financial commitments one can make in their lifetime and if that’s the case, then finding the best deal is a must and not an option. Getting a good deal isn’t easy to come by, especially for first-time homebuyers, but their many ways you can improve your odds for securing the best deal. If you are thinking of getting a mortgage, you should be aware other factors affect your eligibility. Some of these factors include the size of the deposit, whether you’re employed, your credit score, and your current debt status, among many others. Below we have mortgage tips that will help you achieve the best mortgage deal that meets your budget and needs.
So how can I increase my chances of securing a mortgage?
We shall look at these tips for getting the best mortgage in detail below.
- Start Financial Planning In Advance to improve your credit score
- Make your loan look more affordable
- Avoid Credit Applications Just Before a Mortgage
- Speak With A Financial Advisor Or Mortgage Broker
- Get your documentation in order
- Make it a habit to pay bills on time want a mortgage? Always pay bills on time
- Register to vote or your chances might be scuppered
- Carefully manage your available credit
- Those inactive accounts that are old they can wreak havoc on your application close them
- Avoid being in the overdraft section
- When making the application fill it correctly to avoid delay
- Get a mortgage pre-approval then start shopping for a home
- How much of a down payment do you have?
- Don’t forget about smaller lenders
- Don’t take the first offer shop around for a low rate
- Budget for mortgage insurance, if necessary
- Pay Down Debts
- Restructure Your Recurring Debt
- Establish Consistent, Stable Employment
1. Start Financial Planning In Advance
They say we fail because we fail to plan. When deciding to buy a home, especially with mortgage finance, you need to plan at least a year before making the purchase. This allows you to make the necessary arrangements that can increase your chances of approval. A year is enough to work on your credit score, your income documentation, and having enough time to shop around.
2. Improve on your credit score
If you decided to take up a mortgage, remember the mortgage is just another type of loan. Any financial institution about to finance you they have to check your creditworthiness. Are you in the capacity to service the loan? Remember that your credit score can make a huge difference in what kind of a home you can afford. If you have a higher credit score that qualifies you for a mortgage discount, you’re also in a position to negotiate a decent interest rate. So always make sure your credit report is good, and you are nowhere in the records of credit reference agencies. If you find you are not in good records, fix the issue since it will scupper your chances of getting a discounted interest rate and the chance of qualifying for a mortgage.
3. Make your loan look more affordable
To qualify for a mortgage, many lenders usually check on your income and the outgoing (spending) to assess you’re able to afford a mortgage payment without so much struggle. When you decide you will buy a home using a mortgage, the best thing to do to improve your chances of approval is to keep your outgoings as low as possible compared to what is coming in. So if you will apply for a mortgage in January, do not overspend your money on unnecessary items that are beyond the essentials. Remember mortgage lenders will peruse your bank statements, credit cards, current accounts, check on multiple recent credit checks for signs that you might be struggling, and deny you a mortgage. You have to be very careful as this will increase your chance of getting a mortgage. Always avoid these payday loans, gambling transactions, and county court judgments.
4. Avoid Credit Application Just Before a Mortgage
Four months before mortgage application, you should avoid applying for credit. If you want to get a mortgage approval, you have to avoid the application of credit for four months, but some recommend even six months to be absolutely safe.
The reason for this is, lenders peruse your credit profile when you apply for a mortgage, and they will do a “hard credit check” to look for any loan you applied for, such as an overdraft, credit card, or even a utility contract. If they find you have been applying for credit, the lender may likely disapprove of your mortgage since you have been desperately seeking borrowing. Remember that one application cannot harm you, especially if it’s affordable, but loans such as payday loans will automatically disqualify you.
5. Estimate how much you can borrow
When you estimate how much you can borrow, you can be able to increase your chances of getting a mortgage. A lender will use two different ratios to get a mortgage to determine how much you’re qualified for. The first determinant is your monthly housing payment, inclusive of the insurance and taxes, and shouldn’t be more than 28% after pre-tax income. The second determinant is your total debt which is inclusive of the mortgage payment. This, on the other hand, shouldn’t be more than 36% of your pre-tax income. In concluding, the lender will look at the ratio with the lowest payment and use that to determine how much you can borrow.
6. Speak With A Financial Advisor Or Mortgage Broker
Before taking mortgage finance, one of the things we consider vital if you want to increase your chances of getting a mortgage is to chat with a mortgage broker or your financial advisor. These financial advisers or mortgage brokers can shed more light on your financial situation, and they can tell you what you can afford and what you can’t. The amount you can afford and the down payment determine the type of mortgage you choose and also the particular lender who can accommodate you.
7. Get your documentation in order
Another tip that can increase your chance of getting a mortgage is having your documents in order. You have to track down all the paperwork that you need in your application for a mortgage if it has to sail through. The documents you need are your identifications, employment situations, recent tax returns, bank statements, Payslips, credit card bills, passport, driving license, utility bills, social security cars, marriage license (if applicable), among others other documents. So be prepared. You don’t want to miss a payslip that can make you lose a loan.
8. Make it a habit to pay bills in time want a mortgage? Always pay bills in time
If you’re looking for a mortgage, then you have to have a culture of paying your bills in time. Failing to pay your bills in time usually reflects on your credit file, and when too many missed payments are noticed, they might reconsider giving you a mortgage. Don’t ignore even a mobile phone payment. Remember, just one default might stand your way in getting a mortgage. To avoid this, always have a debit card set up for automatic payments so that you don’t miss a payment.
9. Register to vote or your chances might be scuppered
Yes, I know this sounds weird, but if you want to make sure your chances of getting a mortgage are higher, then you just have to be a voter. This is a deal-breaker if you ignore it. You might have just the type of credit score that no lender can refuse to acknowledge, but when your name doesn’t appear on the electoral roll, then getting a mortgage might hit the hard rock. Many lenders use the electoral roll data to determine you are who you say you are, and you reside in the area you claim to reside, and you’re not just anyone trying to launder money. If you aren’t in the electoral roll to vote, then have some proof of address and some identity that you could convince your lender.
10. Carefully manage your available credit
On this point, which is a tip for increasing your chance of getting a mortgage, we look at how much credit is available on credit cards and overdrafts. They usually look at the difference between your combine’s bank accounts, debit balances on the cards, and your combined overdraft limit and credit limits. When going for a mortgage, make sure you don’t have too much credit at your disposal, and also you aren’t too close to your limit. Always make sure your debts are less than 25% of your available credit.
11. Those inactive accounts that are old can wreak havoc on your application close them
Among the things that can increase your chances of qualifying for a mortgage is closing old accounts that do not reflect the current state of your financial capacity. However, do not rush closing down an old credit card just because you have a new one. Remember, you can lose the credit score boost you could have leveraged. If you want to close inactive accounts and cards, notify the bank and have them closed.
12. Avoid being in the overdraft section
If you want to boost your chances of getting a mortgage approval, you have to stay out of being on overdraft. When you stay too close to the overdraft, this might show the lender that you are on the edge of your finances. Other lenders would not want to see you there for the last four months or six. Being in an overdraft will automatically disqualify you from getting mortgage approval.
13. When making the application fill it correctly to avoid delay
These are our in-house tips for filling in the documentation or the online application. It doesn’t matter whether you got the services of a mortgage broker; these tips will help you, so make sure you:
- Correctly state your income avoid rounding up
- Have your full names written correctly as per your Identity card. Do not ignore the middle name.
- Be honest and declare all your debts. I know you might be tempted to hide some of your debts, but the lender will most likely find them, and when you withhold information, that might quickly disqualify you.
- When submitting information on your address, make sure your three-year address history is well written and include postcodes as well.
- Again your honesty will be tested again when you are asked to give information on how much you spend. Be very honest.
14. Get a mortgage pre-approval then start shopping for a home
Just to be clear on the matter, test driving your mortgage chances is not a requirement, so do not take a pre-approval as one of the requirements needed when looking for a home. This is just an acid test, and it’s very valuable when looking for a home. For first-time buyers, having a pre-approval letter and presenting an offer to estates agents or sellers gives them morale, and they know you are a serious buyer. Many sellers usually accept viewings from a mortgage agreement in principle (approval letter) holders.
15. How much of a down payment do you have?
When you’re a first-time buyer, a clever thing to do to triple your chances of getting a mortgage is putting a sizeable down payment offer. The mortgage industry standard of a down payment is 20% of the value of the house, but these days you might secure a conventional mortgage with as little as 3% upfront of the purchase price. Remember that when you put a sizeable down payment, the lender will see your monthly housing costs will be low, and this may increase your chances of getting mortgage approval.
16. Don’t forget about smaller lenders
When looking for a mortgage, many people usually go for the national mortgage lenders, and that’s where some of you go wrong. When you are shopping for a mortgage lender, do not ignore the smaller lenders in the market since they might offer you a unique lending program favorable to first-time homebuyers within that locality. You might find a lender who doesn’t require mortgage insurance and isn’t so strict to those with outstanding credit.
17. Don’t take the first offer shop around for a low rate
Whether a repeat buyer or a first-time buyer, they all make this one big mistake, they accept the first mortgagee offer. If you want to increase your chances of getting a mortgage, don’t just look at one offer which might be expensive to you in the long run; look for a cheaper offer. Remember, this is a financial commitment running for more than 15 years, and a seemingly small difference in the mortgage rate can save you a lot of money over the course of a 15-year-mortgage.
18. Budget for mortgage insurance, if necessary
Just in case your down payment is less than 20% which is the standard rate when taking a mortgage, remember that you have to pay for private mortgage insurance (PMI). Having that budget in mind will increase your chances of getting mortgage approval. In many cases, mortgage insurance rates vary depending on the down payment size, your credit history, length of the mortgage, and many other factors.
19. Pay Down Debts
To increase your chances of getting a mortgage approval, you have to reduce your debts income ratio, which is done by paying off nearly all your debts. Avoid any inaccuracies in your credit report; also do not apply for credit a few months before applying for a mortgage. A very high credit score which is no less than mid 600s will qualify you for a mortgage.
20. Restructure Your Recurring Debt
Your debts have a positive or a negative impact on your mortgage approval. Your recurring debt payments usually affect your purchase power directly. When you pay off your debts or restructure your debts to a level that has reduced your monthly payments, your purchase price is maximized. When you do this, you will free up your monthly income, which will positively impact your application for a mortgage.
21. Establish Consistent, Stable Employment
When applying for any loan, all the lenders look at the source of income to determine whether you will struggle to pay back or you’re capable of settling the debt. To increase your chances of mortgage approval, you have to establish stable employment, which will showcase your ability to have a steady source of income. Stable income flow will increase your chances of qualifying for a mortgage.
The above are the top tips for getting your mortgage approval accepted. We hope that we have been able to shortlist the most essential items, if not all. Do act on these findings, and you will automatically increase your chances of getting a mortgage approval.
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