Improve your chances of getting a mortgage
If you were going to a job interview, you probably wouldn’t wear tatty old trainers, sloppy jogging bottoms and a top with a big glob of egg yoke down the front.
Making a good impression counts - we know that.
Yet some of us fail to follow that same basic principle when it comes to being at our best for a mortgage application.
Banks and building societies have different criteria for lending, but they all need to be satisfied you are responsible with money and can afford your repayments on the mortgage. “Affordability” is a non-negotiable bottom line for lenders under new MMR (Mortgage Market Review) rules. Consequently, lenders will want to see evidence - probably going back at least three months - of your income and outgoings to demonstrate that they are not offering a mortgage to a person who might struggle with its repayments.
Showing them statements littered with unaccounted spending, missed credit card payments, unauthorised dips into the red and steadily depreciating balances will not put you in their good books.
What you need to do is make your finances presentable to give you a wider choice of competitive mortgage products to choose from.
Advisers from NMS (Nottingham Mortgage Services) - a subsidiary of The Nottingham - know exactly what lenders are looking for. They deal with hundreds of them, searching the whole of the mortgage market to find borrowers the best deal.
NMS head of customer services, Tina Hayton-Banks has some advice to help you be a more attractive proposition.
Don’t show lenders dwindling account balances
Lenders want to see you are not spending more than you are earning, for obvious reasons. Evidence of a commitment to saving - or, at least, have spare cash at the end of every month - will help demonstrate your mortgage is affordable.
Cut down on “non-essential” spending
Some lenders factor so-called “non-committed” expenditure - such as satellite TV subscriptions, gym membership, etc - into their affordability calculations to ensure your long term affordability should mortgage rates change.
Check your credit score
Make sure you are on the electoral roll and check your credit file for mistakes. Lenders will run checks before offering you a mortgage. Make sure your credit file is correct and potential problems are resolved prior to making a mortgage application. If you are worried about something, tell your mortgage adviser.
Try to pay off credit card bills and hire-purchase agreements
Lenders work on worst-case scenarios. They will not like lots of high-interest debt in your name. They have to be sure your mortgage will remain affordable if you suffer a drop in income or interest rates rise. Clear as much non-essential debt as you can.
Do not go overdrawn
Be extra careful with your outgoings. Going into the red because you forgot about a payment or failed to transfer money from one account to another will not look good. Some lenders - not all - will turn down your mortgage application because of an unauthorised overdraft.
Don’t rely on bonuses and overtime to bolster your finances
Lenders won’t consider such income unless it is absolutely guaranteed.
Speak to a professional mortgage adviser
Staff at NMS will go through your finances to help you make the best possible application to a lender whose criteria fit your circumstances.