Buying a home is likely to be the biggest financial commitment you ever make. And, as part of that process – or if you want to refinance the loan on your home – you’ll need to apply for a mortgage.
To do so, you’ll need to convince a lender that you’re capable of repaying the loan. Even if you believe you’re trustworthy on paper, a lender could deny your mortgage application for several reasons, such as errors on your credit report or red flags on your bank statements.
Similarly, if you have a complex income source, for example if you’re self-employed, you may also find it more complicated to apply for a mortgage.
Thankfully, there are some ways you can prepare yourself as much as possible for a mortgage application to ensure you have the best chance of acceptance. Here are five practical tips to help you get the mortgage you need.
1. Check your credit report for mistakes long before applying
First, before you apply for a mortgage, it’s often wise to request a copy of your credit report from the three major credit reference agencies – Equifax, Experian, and TransUnion.
Your report should include any accounts you’ve had open in the last six years, such as credit cards, loans, and overdrafts. It’s important to check these reports as your credit file could contain mistakes such as:
- Wrong identity information, such as your name, phone number or address
- Closed accounts reported as open
- The same debt listed more than once
- Payments incorrectly reported as late.
If you identify any mistakes on your credit report, you should contact the institution to dispute this long before you apply for a mortgage.
Leaving the mistake on your file could affect your credit score and hamper your chances of approval – even an error as seemingly minor as incorrect personal information can ultimately harm your chances of obtaining the mortgage you need.
If you do spot an error, you should speak with all three credit agencies about it. They can add a “notice of correction” on the mistake, and you can explain a listed default.
2. Register to vote
Being on the electoral roll can boost your credit score and improve your chances of mortgage acceptance. This is because the data from the electoral roll can help lenders to confirm your identity as well as information such as your date of birth and address.
When you request a copy of your credit file from one of the three main agencies, it should state whether you’re registered to vote, but you can always check with your local council to be sure.
You should ideally do this as early as possible to ensure that it will show up on your report in time for your mortgage application.
3. Clean up your bank statements
Lenders will typically ask you for at least six months’ worth of bank statements when you apply for a loan. Despite this, Mortgage Strategy reports that 10% of adults were denied a mortgage due to not having bank statements for the last three to six months.
The lender will comb through your statements to check for red flags, such as:
- Whether you pay your debts on time
- Payday loans
- You regularly dip into your overdraft
- Regular bank charges
- Payments to things like gambling companies.
Red flags on your bank statements can lead lenders to believe that you’re irresponsible with your money, or aren’t living within your means. So, you should ensure that your bank statements are free of any red flags during the period before you apply.
4. Ensure you’re prepared
Before applying for your mortgage, you should ensure that you’re properly prepared. You will generally need to supply certain documents to support your application, so having everything you need on hand can increase your chances of acceptance.
This is especially the case if you have a complex income, such as that of a self-employed worker, as Mortgage Strategy reports that 28% of UK adults with non-typical income streams have had an application rejected by a lender.
The documents needed generally varies from one lender to another, but you can typically expect to need:
- Proof of your name and address, such as your passport or driving license
- Bank statements
- Three to six months’ worth of payslips and proof of any other income such as commission or bonuses, perhaps with a P60 form
- Two to three years of accounts and an SA302 form if you’re self-employed
- Evidence of your deposit
- Copies of your current and future contracts if you’re a contractor.
Having all this information on hand before you apply for a mortgage can make the process of obtaining one far smoother.
5. Work with a professional
Working with an expert can make it easier to obtain a mortgage. For example, we understand how lenders assess income, so if you have a complex source of income or you’re not sure what your borrowing potential is, we can work with a wide choice of lenders and establish which is the best lender for your current circumstances.
If you would like to find out how we could help you through the mortgage application process, please email enquire@london-money.co.uk or call (0207) 808 4120.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.