5 best tips to improve your chances of being approved for a mortgage
To get the best mortgage deal, you have to be as attractive to lenders as much as possible, especially during this pandemic period. Some ways can be used to improve your chances of being approved for a mortgage. The first thing you should do is take your time to understand some things that will make you attractive to potential mortgage lenders, like fixing and improving your credit score and ensuring that you have sufficient deposit savings. This will allow you to have a wide range of deals at your exposure and get a loan that you will need for the mortgage quickly. Here are our five tips to improve the chances of being approved for a mortgage and making your dream of securing a home come true. Take a look.
Tips to improve your chances of being approved for a mortgage
A person’s credit score is like their financial CV; it contains all the necessary information that a lender will need for identity confirmation and the determination of whether that person is a trustworthy borrower or not. To convince the lenders that you have the financial discipline and you can be able to pay back your mortgage, you will have to investigate and check your credit reports. That will show you your repayment history and how it is rated.
Credit reference agencies available in the UK can enable you to check this, like Equifax, Experian, and Transunion. Viewing your statutory credit reports on these agencies is free. Other sites like Clearscore, Noddle, and MoneySavingExpert.com will also offer you this information without paying a dime online.
Check the information on the report once you have it very carefully, as this can damage your score significantly. The details that you are likely to get on your credit report are accounts you have opened that are six years over:
- Checking your credit score
- Credit cards
- Other utilities
- Correct any mistakes/ errors with your credit score immediately
After checking your credit score and determining that some of the information on your credit files held by other agencies has an error or is false, you should request some correction. If asking for the correction yourself does not work, it will be wise to involve the Financial Ombudsman. They can order the correction from those agencies at no cost.
After the error has been corrected, you should personally contact Equifax, Transunion, and Experian to ensure that the information they have on your credit file is the right one. This is because one agency might update, and others will not.
If you have defaulted and are willing to settle your debt with the lender in whole or portions, you can try negotiating with the lender. During the negotiation, you can make a bargain to pay and request them to wipe the default off your credit file. This will make your credit file more viable.
- Make improvements to your credit score.
If you have a bad credit score, there are some ways that you could use to improve it. An agency like Experian has a new free service known as Experian Boost, which could instantaneously enhance your score. You can volunteer some information about how you manage your finances. You will be required to reveal the payments made to things like council tax, savings, and payments to digital entertainment services such as Spotify and Netflix. That will boost your score over time.
Also, registering as a voter will help improve your credit score, which to those who haven’t done so. You should also ensure that the address and name provided by your credit providers and those used to pay household utility bills are correct and paid on time.
Those who are renting and paying their rent on time can use the free renting scheme to their advantage to improve their credit score. That can be done by liaising with your rent collecting agency to be notifying Experian that you have been paying on time.
Also, registering as a voter will help improve your credit score, which to those who haven’t done so. You should also ensure that the address and name provided by your credit providers and those used to pay household utility bills are correct and are paid on time.
Those who are renting and paying their rent on time can use the free renting scheme to their advantage to improve their credit score. This can be done by liaising with your rent collecting agency to be notifying Experian that you have been paying on time.
- Ensure that your debt-to-income ratio is lowered
When mortgage lenders evaluate your creditworthiness, they will look at the amount of credit you owe. That will impact the amount of money you have at your disposal to repay the mortgage debt every month. Before applying for a mortgage, it is vital to ensure that you clear your debts, such as credit card bills and other personal loans, or decrease them to minimum levels before applying for a mortgage. By showing that you have some income at your disposal, you will increase your chances of being approved for a loan from mortgage lenders.
Also, avoid applying for loans too often because even if they are not approved, this is recorded, thus making your credit score look bad. If you can, avoid overdrafts before mortgage applications.
- Go big with your down payment.
Before applying for a mortgage, you should also ensure that you have saved a considerable amount for the mortgage deposit. That is crucial because it will allow you to get better deals that have lower interest rates. Presently you will need to save a minimum of 5% as a deposit when purchasing a property to get a loan.
The government has some backed savings schemes –like the Help to Buy Isa and the Lifetime Isa- which are helping you build your deposit. For those struggling with savings, some lenders will even offer a 100% mortgage as long as a family member can guarantee.
The above tips will give an insight into what one should be doing to increase the chances of getting approved for a mortgage. There are others that you can look at, but this is top on that list. Before applying for a mortgage, ensure that you have prepared sufficiently beforehand by streamlining your finances and ensuring that your credit score is attractive to potential lenders.