Integra News How do I get a mortgage?
So you want to get a mortgage. What are the mistakes that are all to easily made that could see your application miss the mark? Avoid these and you will maximise your chances of success!
Ignoring Your Credit History
Most lenders have a computer make an automated decision. About whether to lend to you after looking at your application and obtaining your credit report. Review this as soon as possibly so you can see how they are going to view your past.
Not Paying Your Commitments
Non-payment of credit commitments are an obvious area of concern for a mortgage lender. If you haven’t paid your credit card bill they will reason that there’s a fair chance you won’t pay your mortgage either. That’s a risk many lenders will walk away from so keep on top of all of your credit commitments. That goes for loans, credit cards, car and sofa finance etc. Even if you are in dispute with a provider, it can be to your detriment to withhold payment. Even if it is not your fault, don’t expect a mortgage underwriter to see it like that.
Missed payments, defaults, county court judgements, bankruptcy will all reduce your chance of success and so are best avoided. It might not be a no from everyone but if it is still possible you will likely be paying more than everyone else.
I didn’t realise...
Don’t expect a mortgage underwriter to accept ignorance or lack of understanding as an explanation either. It may feel harsh but better you know.
Use Of Emergency Borrowing
If you have used lines of credit like overdrafts or payday loans in months prior to applying for a mortgage you are presenting to the lender that your finances are not under control. Avoid this wherever possible.
A particularly misunderstood fact is that a “cash advance” on a credit card can undermine your mortgage application. It’s one thing to use a cash machine with your debit card however, if you draw on your credit card then to a mortgage lender it looks like you are so desperate for cash you have nowhere else to turn. That may not be the truth of it however, perception is everything so don’t give a poor impression of yourself.
Misrepresenting Where You Live?
A common mistake made by first time buyers is to have documents like bank statements sent to their parents address rather than where they live. Similarly, they may only be registered on the electoral roll at their parents home. Sometimes, it feels easier to do this than keep changing it every time you move to another rented place however, it can cause problems for a mortgage application. The lender has to feel like they know who they are dealing with and to are expected to detect fraud.
Having your address history accurately reflecting where you have lived and registering on the electoral roll where you live makes their checking process straightforward. Trying to correct this late in the day causes delays. Getting on the electoral roll to the point the lender accepts it (i.e. is visible on a credit report) may take several weeks. That’s long enough for a seller to get tired over the lack of progress and possibly pull out.
Lacking Suitable Income Evidence
Make sure your payslips reflect your actual name. If you have recently married but not updated your payroll department, do this now.
Likewise, if the address detailed on the payslip doesn’t match your home address get this corrected too.
Check for any payslip deductions and ensure your mortgage adviser has taken these into account. They will know which lenders need to factor in your pension deductions, share savings scheme, extra holiday days purchase and so on.
Avoid Doing Your Tax Return
Lots of self employed buyers are afraid they won’t be able to get a mortgage. This is not the case but just like any buyer, you need to get your affairs in order.
Accounts or tax return documents typically cannot be used if the most recent are more than 18 months old. So if you are a sole trader and completed your self assessment for the year ending April 2020 then you are good to use that along with your April 2019 return up until early October 2021. After that lenders will expect you to complete your return for April 2021 regardless of the fact HMRC don’t require it until January 2022. Ultimately, lenders don’t like making a lending decision based on old data. So don’t leave you self assessment return to the last minute or you might be waiting longer for your mortgage application to be approved.
At present they will also likely ask questions about the impact of COVID-19 on your business and look at recent business bank statements to feel sure you are still trading in line with your other (more historic) evidence.
Filling in lender agreement in principle forms
You might feel encouraged to do this to give either the estate agent or yourself the peace of mind that your mortgage is approved. However, this could prove counterproductive. Firstly, with some lenders you will risk damaging your credit score by completing this step. It’s rarely necessary to do this early on so let your mortgage adviser issue you with a decision in principle instead based on their advice.
They will also be more likely to fill in a lender affordability calculator to accurately reflect the lender expectations i.e. correctly assessing bonus or overtime income. They will better know what to include and exclude.
Being prepared can make the world of difference so try to start getting your ducks in a row at the earliest opportunity and your chances of success will be significantly improved.
For more information please contact our team of advisers on 0117 251 0083 or email email@example.com
PLEASE NOTE: A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. We offer a comprehensive range of mortgage products from across the market. We offer both first and second charge mortgages, but not deals that you can only obtain by going direct to a lender. For those seeking to increase their existing borrowing, alternative finance options may be available and more appropriate for your needs. For example, a further advance from your existing lender or an unsecured loan (e.g., a personal loan).