Before you start looking for a house to buy, it’s important to maximise your chances of getting a mortgage. There’s nothing worse than falling in love with a house, only to have your mortgage application rejected.
Follow these tips as early in your house search process as possible. The more time you have to improve your credit score, the more attractive you’ll be to potential lenders.
Check your credit file for errors
Errors on your credit file happen for a number of reasons. If you’ve ever been a victim of fraud, for example, your file can show missed payments on loans or credit cards in your name that you didn’t arrange.
Mortgage lenders may use any of the main credit reference agencies and the scores or information can vary between each. It’s important to check each agency for errors as early as possible in your house buying process, as contested errors can take time to remove from your file.
The main agencies you can check your credit file with, for free, are Experian, TransUnion (formerly CallCredit), and Equifax. If you spot something that doesn’t look right, contact them immediately to resolve it as soon as possible.
Avoid applying for several credit agreements in quick succession
Whether you need a credit card to pay for new white goods or you want to secure an Agreement in Principle to help with your house search, avoid applying for several lines of credit in one go.
Try to leave at least a month between each credit application, otherwise this will impact your credit score. If you’re rejected for any line of credit, don’t apply for any more as this has serious implications for your credit rating.
Clear your unsecured debts before applying for a mortgage
Mortgage providers will look at the current amount of credit you already owe, and have access to, as a factor in their decision to lend to you.
Close any unused accounts, even store cards, and pay off as many debts as you can in advance of your mortgage application. It can take up to 8 weeks for a settled debt to show on your credit score, so keep this in mind before you apply for a mortgage.
Always pay on time
One missed or delayed payment could be all it takes to impact your chance of getting the mortgage amount and rates that you need. Several missed payments could make it very difficult to borrow anything.
Make sure you pay off your credit cards, phone bills, and utility bills on time every month. Pay them in full, too, rather than only covering the minimum payment. As well as clearing your debt faster, you’ll also not be paying huge interest rates on your outstanding balances. This will leave you with more capital to save for your deposit.
Save a big deposit
Mortgage providers look at the ‘loan-to-value’ or LTV of a mortgage. The lower the percentage of the mortgage against the overall cost of the property, the higher chance you have of being accepted for the loan.
While it’s possible to buy a house with a 10% deposit, a larger deposit will reduce the amount you need to borrow. This could also save you significant money in the long-term, as many of the better interest rate offers are available to buyers with bigger deposits.
Speak to a mortgage adviser
Before you apply for a mortgage, seek advice from an expert. They will be able to assess your current circumstances and mortgage requirements, and help you to find a mortgage that suits your needs.
They will also make sure that you have all the relevant documentation required before you start your mortgage application. This will help to avoid delays in getting the mortgage and ensure that you are eligible for the offer you’re applying for.
Documents include an up-to-date passport and driving license, proof of your current address, and evidence of any income. You’ll also need to supply your P60 if you’re employed, or evidence of your previous tax returns and accounts if you’re self-employed.