These days mortgage lenders are under a great deal of (regulatory) pressure to ensure that they only grant mortgages to people who really can manage them over the long term. A mortgage application, therefore, needs to demonstrate to the lender that you can reasonably be expected to be able to make your mortgage payments over the entire duration of the mortgage term. Here are three tips as to how to achieve this.
Only look for property which is likely to appeal to mortgage lenders
This may seem like a very strange tip so it may benefit from some explanation. A mortgage is essentially a loan which is secured against a property. In the event that the buyer defaults on the mortgage, the lender can, as a last resort, sell the property and use the funds raised towards the outstanding balance on the loan.
If a lender is forced to do this, they will aim to do so with minimal hassle to themselves, hence they will have a natural preference for properties which are likely to sell quickly regardless of the state of the housing market at any given point in time. For example, a flat in a residential housing unit is likely to be more appealing to a mortgage lender than a flat above commercial property because the latter could wind up being above a business which creates a lot of noise or smells or parking issues and hence becomes more difficult to sell.
Make your credit scores look as good as they possibly can
There are three main credit reference agencies in the UK – Equifax, Experion and CallCredit and lenders may use any one of them. Therefore, as an absolute minimum, you want to get a copy of your credit report from each agency and check it for mistakes (they do happen, but the good news is they can be rectified).
You also want to check for anything your lender may see as a red flag, which can be anything from an old payday loan or your name being missing from the electoral roll. Some of these red flags are going to have more of an impact than others and similarly some of them will be easier to rectify than others. For example, if you have taken out a payday loan, then the evidence of it will, under current rules, be stuck to you for 6 years, but a hefty deposit (15% or better) and small repayments compared to your (current and projected) income may see you through. By contrast, being listed on the electoral roll should be an easy win.
Minimise the changes you make in your life
If you are planning any major life changes, such as changing employers, getting married, or having children, then think carefully about how they might be viewed by your mortgage lender and if necessary consider postponing them until after you have secured your mortgage. For example, you may think that getting married would be viewed positively, giving you two incomes for one property, but your lender may ask themselves if your marriage is a sign that you intend to have children sooner, rather than later, and hence may find yourself on a reduced income and with greater expenses before you have built up much equity in your property.
Indlu are estate agents in Denton Manchester, offering a no sale, no fee estate agency service. For more information or to complete your free online property valuation, please contact Indlu today.