Fundamentally, there is only one way to get a yes from a mortgage lender. That is to convince them that you are able and willing to pay back whatever they lend you. Part of this depends on your general situation, especially your financial situation. Another part of it depends on what lender you approach and how. With that in mind, here are some tips on how to get a yes from a mortgage lender.
Polish your credit rating
If COVID19 has ravaged your credit score then you need to put right the damage as quickly as possible. This may seem disheartening but the sooner you get started the sooner you’ll have it back in the sort of condition lenders want to see.
Even if you’ve been holding your own through COVID19, it’s still important to check your credit record. First of all, mistakes happen and if they do you want them corrected before you apply for a mortgage. Secondly, your credit record can alert you to any fraud involving your identity. Again, if this happens, you want it sorted before you apply for a mortgage.
Think about what your financial statements say about you
Assume that any prospective lender is going to want to see six months worth of financial statements. They may want to see less but it’s highly unlikely that they’ll want to see any fewer than three months worth of statements. Take a cold, hard look at your bank statements and see what impression they give of your spending.
In general, the lower your deposit, the more important it is to show that you’re managing your money well. For example, if you have a 20% deposit then a lender may not worry too much if your bank statements show that you like to socialize. If, however, you only have a 5% deposit and a trail of restaurant meals on your bank statements, then a lender may question your priorities.
If you’re spending money because you’re building up a side-hustle then it’s advisable to get a credit card specifically for that purpose. A standard personal one is fine (assuming you’re working as a sole trader). Just make sure that it’s kept for your business so you can separate out the transactions easily for a prospective mortgage lender (and HMRC).
Do your best to build up a solid deposit
If you can put together a deposit of at least 5% then you may be able to qualify for the government’s Help to Buy Mortgage Guarantee Scheme. It’s certainly worth checking this out as it effectively boosts your deposit by up to 15%. In other words, it essentially turns a 5% deposit into a 20% deposit and hence can open up a lot more deals for you.
If you can’t (or don’t want to) for the government’s Help to Buy Mortgage Guarantee Scheme, then you may still be able to get a mortgage. You are, however, almost certainly going to need to work with a specialist lender. This means that using a mortgage broker is highly advisable.
Aim for stability
This may seem like an odd comment but the key point to remember is that your lender is trying to predict your ability and willingness to repay your mortgage. The only information they have to go on is what you’ve done in the past.
Having a decent financial track record over an extended period is likely to make you far more attractive than having a stellar track record part of the time and an awful one part of the time. Similarly, try to avoid making significant changes just before applying for a mortgage. For example, if you’re thinking of a career change, wait until after you’ve been approved.
For advice and help please get in touch.