Three years ago the Financial Conduct Authority introduced stricter lending criteria to encourage banks and building societies to lend more cautiously and avoid another potential financial crisis. Since then its Mortgage Market Review rules have required lenders to ‘stress test’ mortgage applicants to ensure they could survive financially if interest rates were to raise significantly from the current average rate of approximately 2% to six or seven percent. Consequently, mortgage applicants will be subjected to tougher affordability and qualification checks.
1. Do a credit check on yourself
Almost every adult in the UK has a credit score, which are used by lenders to make mortgage decisions. Find out if yours features any bill or loan payment skeletons dragging it down; websites to consider include: Equifax, Experian, Callcredit, checkmyfile and Clearscore.
2. Save up as much as possible
As a rule, the larger your deposit the lower the mortgage rate you’ll be offered, so save up. To access the cheapest rates, you will typically need a 40% deposit although there are some great mortgages available if you have 10% to put down.
3. Register to vote
If a lender can’t find you on the Electoral Roll at your current address, your application is much less likely to go through.
4. Explore the mortgage market
There are dozens of different mortgage types to consider, but only a few might be best for your circumstances. Most borrowers are locking into fixed rates, although Bank of England base rate trackers are still popular.
Our preferred mortgage broker is Trinity Financial and they have access to a wide range of banks and building societies. Their mortgage advisers will tell you exactly how much you can borrow and ensure you get the cheapest rate. Call them on 020 7267 9399 or visit: www.trinityfinancialgroup.co.uk/winkworth
5. Don’t go into the red
Ensure you don’t go overdrawn and make sure you pay your bills – the credit check agencies will count it against you.
6. Run up a list of your monthly expenses
When you apply for a mortgage you will be asked about your credit card and loans, and how much you spend on your utility bills.
During your mortgage interview the lender will want to know what you spend approximately on living outside of bills, rent and travel. Having it to hand will speed up your application.
7. Find your bank account statements
It sounds old fashioned, but most lenders still require mortgage applicants to provide their bank statements going back three or even six months.
8. Lay off the plastic
Credit check agencies like Experian rate your credit worthiness partly on your credit card usage and management. Don’t max out your cards just before you apply.
9. Clear any loans you may have
Mortgage lenders do not always like it when you’ve got outstanding loans especially if the monthly repayments are high. Do your homework and find out if they will count against you.
10. Be boring
It may sound dull but during the months before you apply for a mortgage, it’s best to keep your ‘disposable income’ spending to a minimum. Your lender may check your bank statements and ask you to explain what you are spending your money on.