Tips to improve your chances of being approved for a mortgage

For the majority of people, buying a home is the single biggest commitment of their lives – and, equally, taking out a mortgage is the largest loan most of us will ever sign up to. With this in mind, you should shop around to get the most competitively priced loan with the best terms rather than having your choices potentially limited.

Very often borrowers, particularly those buying a home can find lenders provide only limited packages or show apprehension to offer a loan. Thankfully, there are several tricks and tactics you can employ that will vastly improve your chances of being approved for a mortgage – regardless of whether you are buying your first home or are looking to upgrade to another dwelling.

Credit scores count

Credit scoring is big business these days and lenders will scour your credit history to look for any black marks, defaulted loans or borrowing problems you might have had in the past. Before applying for a mortgage, you should first request a copy of your credit report to see exactly what a prospective lender is going to see. Even if you have a bad rating, there are many ways you can improve your credit score, including closing outdated credit cards and ensuring you are on the electoral roll.

Time with the same employer shows stability

Lenders offer loans based on the probability of being paid back. Being with the same employer for a reasonable length of time can help show stability and consistency and will make them more likely to believe you will be able to fulfil your payments. Consequently, if you are thinking about changing jobs, you would be better off delaying and agreeing your loan before the move.

Only borrow what you can afford to pay back

The starting point for any mortgage application is to first sit down and work out the exact figure you need, plus how you intend to pay it back. This is the first question any prospective mortgage lender will ask so you need to have a very clear idea of your figures before applying.

Firstly, you will need to have enough to pay for the property in question but also remember the other associated fees involved in buying a home. Once you know the amount you need, you will need to work out how much you can afford to pay back every month and over how long. Without these clearly defined figures, you will have little chance of persuading a lender to agree your loan.

Reduce or pay off any existing debt before applying

Mortgage lenders will take a dim view if they find you already have a mountain of unpaid credit cards or existing loans that remain outstanding. Remember, the primary criteria used by lenders is their perceived risk: the probability of the applicant being able to pay off their loan.

Before applying for a mortgage, try to eliminate any existing debts. Not only will this improve your credit rating, it will also help convince lenders that you are good for your word and will pay them back.

Remember the importance of bank statements and proof of income

No matter the size of the loan, a lender will always want to see proof of income and bank statements from (at least) the last three months that corroborate your wage slips. Remember too that this will give the lender an idea of how you spend so it is a good idea to reduce your spending in the run-up to making an application.

Unfortunately, if you are self-employed, it can be considerably more difficult to be approved for a mortgage and in most cases you will need to show the lender your full accounts from the last three years. If you have only just turned self-employed, you will likely find your choice of lenders limited.

A bigger deposit helps

Putting down a big deposit on your mortgage shows a prospective lender that you can save and it reduces the risk of their lending. Most mortgage providers offer their best deals to those applicants that can put down a sizeable deposit, meaning you will benefit from lower rates and/or reduced terms.

Buying with others can make things easier

Investing in a property with a significant other can make sense but remember there are no guarantees in life and you should put in place some contingencies should you break up, fall out or one party wants out of the arrangement. Joint mortgages can be easier to attain, particularly if the other party/parties have a better credit rating than you or earn a higher wage – but they are not without risk.