Following the introduction of new lending criteria in 2014, it is harder than ever to secure a mortgage and the lender has to be sure that a borrower can afford the repayments. As there is a wide range of mortgage products, with varying terms and rates of interest, it is advisable to improve your finances if you want the best deal. As a mortgage advisor, you will be able to help your client to get the very best deal for their circumstances.
What is lending criteria based on?
The criteria varies from lender to lender but most will consider the size of the mortgage, income and employment status, any savings, existing debts, outgoings and the credit rating. Lenders usually check with credit reference agencies to see if the client has a good credit history. Prior to applying for a mortgage, check your credit file and correct any information that isn’t accurate.
To be able to secure a mortgage, it is vital to demonstrate that you are able to manage credit. If an applicant has several credit cards with lots of available credit, lenders will worry that the credit may be used to the maximum level, which could affect chances of repaying the mortgage. Spending on credit cards up to the limit will worry lenders. Many mortgage companies are happier if a person has only used around their credit limit.
Preparing to apply for a mortgage
Start to mend credit ratings prior to applying for a mortgage. Don’t miss any repayments on any debts, existing mortgages or bills. All missed payments remain on a credit file and could result in not getting a mortgage.
Avoid applying for credit during the three to six months before applying for a mortgage, as this could hinder an application. A lender will perform a credit search each time credit is applied for, even for a mobile phone taken on a contract. This could spoil chances of securing the loan.
Make sure that spending is under control before applying for a mortgage, as excessive outgoings could result in an application being refused.
Deal with paperwork in good time
Rather than wait until the application process to supply documentation, start prior to making the application so that all bank statements and other documents are readily available. Papers required may include the form P60 with pay and tax details for the last year, documents which prove identity, proof of address and pay slips.