Expert Tips You Need To Know Before Applying For A Mortgage

 

What matters when you apply for a mortgage? Firstly, your credit score is crucial. The higher your credit rating, the better your chances of being approved for credit at the most favourable rate. There are other factors as well, such as your debt-to-income ratio and providing a suitable proof of address.

This invaluable guide by the team at Quealy & Co Financial Services Ltd. assists you in preparing to apply for a mortgage.

Ways to enhance your credit score

1. Prove where you live
Make sure you register on the electoral roll at your current address, even if you live in shared accommodation or with your parents.

2. Build your credit history
Having limited or no credit history can hinder companies' ability to assess you, potentially resulting in a lower credit score. This is a common issue for young individuals and newcomers to the country. Fortunately, there are steps you can take to establish your credit history.

3. Make payments on time
Paying your bills on time and in full every month demonstrates to lenders that you are a dependable borrower, capable of managing credit responsibly.

4. Keep your credit utilisation low
Your credit utilisation refers to the percentage of your credit limit that you utilise. For example, if you have a limit of £1,000 and you've used £500 of that, your credit utilisation is 50%. Typically, lenders view a lower percentage positively, which can consequently enhance your credit score. Aim to keep your credit utilisation below 30%.

5. Check for errors and report any mistakes on your credit report
The three credit reference agencies in the UK are Experian, Equifax, and TransUnion, each generating an individual credit report about you. It's free for you to check these reports. Even minor errors, like a mistyped address, can impact your score and may be sufficient for a lender to decline your credit application. Check your credit report to ensure that all the information is accurate and up to date. If you notice a mistake, contact the provider directly and request that they amend it.

6. Avoid moving home a lot if you can
It isn't always feasible to evade this, but it is vital to bear in mind that lenders value stability in your situation. Frequent moving may cause lenders to suspect that you are struggling to pay your rent, for instance.

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How can improving my credit score benefit me?
A higher credit score indicates that companies perceive you as a lower risk, making it more likely for you to be approved for credit. This is because a high score indicates a history of managing your credit responsibly, which includes making repayments on time.

The benefits of improving your score may include:

• Better chance for mortgage approval
A higher credit score means you will have a greater chance of being approved for a mortgage. You might also be able to select from a broader range of offers and providers.

• Lower interest rates
If lenders perceive you as a lower risk, they may provide you with better interest rates on loans and credit cards, resulting in cheaper borrowing costs.

• Higher credit limits
If you enhance your score, you ought to have a greater chance of maximising your borrowing potential.

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How long does it take to improve your credit score?
Details about your new bank account or credit card may take several weeks to appear on your credit report, so it might take at least this time to see tangible improvements in your score. You might need to wait for new accounts to mature a bit (for instance, for a few months) before they begin to positively influence your credit score.

Regularly paying your bills punctually will enhance your score as you establish a credit history. Missed payments, defaults, and court judgments will remain on your credit report for six years. However, the impact of missed payments or defaults is likely to lessen as the record ages. After six years, they will be removed from your report entirely.

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What else do mortgage lenders check before approval?

1. Proof of ID
A passport or driving licence is the more commonly used documents for proof of identity. You'll also need to ensure these documents are valid and in date. Please ensure your driving licence reflects your current address.

2. Proof of address documents
These can include council tax bills, utility bills, bank statements and usually should be dated within the last three months.

3. Payslips
You may need to provide your latest payslips for a lender to verify your income.

4. Bank Statements
This should be the account that your salary is paid into. Lenders will also look at your account type, balance, transactions, and average balance history.

Lenders use the information from bank statements to calculate your debt-to-income ratio. This helps them decide whether you can afford the mortgage.

5. Evidence of where your deposit is coming from
This is important as lenders must see Proof of Deposit to understand where your deposit is coming from.

If your deposit is from your savings, you’ll need to provide evidence via bank statements and any large payments will need to be explained.

Gifted mortgage deposits will usually require a signed letter from the person who is gifting you the money.

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Are you thinking of applying for a mortgage?
If you have any questions about applying for a mortgage, we are ready to help you. For mortgage advice with no broker fees, book your mortgage appointment with Quealy & Co Financial Services Ltd.

Our Financial Services team at Quealy & Co. is ready to help first-time buyers, current homeowners, and property investors. Contact our friendly team to find out how we can help you get the best deal.

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Call us: 01795 505761⁠
Email us: mortgages@quealy.co.uk

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⁠**Your home may be repossessed if you do not keep up repayments on your mortgage.**

Quealy & Co Financial Services Ltd. is authorised and regulated by the Financial Conduct Authority No. 919693