Securing a mortgage is a crucial step in the home-buying process, and it can be a daunting task, especially if you’re a first-time buyer. With the ever-changing economic landscape and stricter lending criteria, it’s essential to be well-prepared when applying for a mortgage.
This blog will explore ten effective strategies to increase your chances of getting approved for a mortgage and making your dream of homeownership a reality.
Increase your deposit size
One of the most significant factors lenders consider when assessing your mortgage application is the size of your deposit. The more substantial your deposit, the lower your risk to the lender, and the more likely you are to secure a favourable interest rate. Aim to save as much as possible for your deposit, ideally at least 10% of the property’s value. The more you can put down, the better your chances of getting approved and securing a competitive mortgage deal.
Improve your credit score
Your credit score is a numerical representation of your creditworthiness and is vital in the mortgage application process. Lenders use your credit score to assess the level of risk you pose as a borrower. To improve your credit score, pay your bills on time, keep your credit utilisation low, and avoid applying for new credit in the months leading up to your mortgage application. Regularly check your credit report for errors and dispute any inaccuracies that could negatively impact your score.
If you have a limited credit history, consider building your credit, such as opening a credit card with a low limit and paying off the balance in full each month. Alternatively, you can become an authorised user on someone else’s credit card account with a good payment history to benefit from their positive credit behaviour.
Pay off your debts
Lenders also consider your debt-to-income ratio when evaluating your mortgage application. This ratio compares your monthly debt payments to your monthly income, and the lower it is, the better your chances of getting approved. Before applying for a mortgage, focus on paying off as much of your existing debt as possible, especially high-interest debt such as credit card balances and personal loans. This will not only improve your debt-to-income ratio but also free up more of your income for your mortgage payments.
Reduce your outgoings
In addition to paying off your debts, reducing your overall outgoings is essential to demonstrate to lenders that you have sufficient disposable income to afford your mortgage payments. Carefully review your monthly expenses and identify areas where you can cut back, such as dining out, subscriptions, or unnecessary purchases. Create a budget and stick to it, allocating some of your income towards savings and debt repayment. By reducing your outgoings, you’ll have a stronger financial position when applying for a mortgage.
Look for ways to save on your regular bills, such as switching to a cheaper energy provider, negotiating a better deal on your mobile phone contract, or cancelling unused subscriptions. Consider cooking meals at home instead of eating out, and look for free or low-cost entertainment options in your area. You can put every penny you save towards your deposit or to pay off debt, improving your mortgage chances.
Increase your incomings
While reducing your outgoings is essential, increasing your income can also significantly boost your mortgage chances. Consider promoting your earnings by asking for a raise at work, taking on additional shifts, or starting a side hustle. The more stable and consistent your income, the more favourably lenders will view your mortgage application. If you are self-employed, ensure you have at least two years of certified accounts or tax returns to demonstrate your earnings to potential lenders.
Look for opportunities to upskill or gain new qualifications that could lead to a higher-paying job or freelance work. Consider renting out a spare room in your current home or offering your services as a pet sitter, tutor, or freelancer in your spare time. Be creative and proactive in increasing your income, which can significantly impact your mortgage application.
Prepare your paperwork/proof of funding in advance
When applying for a mortgage, you’ll need to provide a range of documents to support your application, such as proof of income, bank statements, and identification. Gather all the necessary paperwork before submitting your application to streamline the process and avoid delays. Ensure that your documents are up-to-date, accurate, and easily accessible. Having your paperwork in order will demonstrate your organisational skills and commitment to the mortgage application process.
Create a checklist of the required documents and systematically work through it, requesting any missing paperwork from your employer, bank, or other relevant parties. Make copies of your documents and store them securely, physically and digitally, to ensure you have backups in case anything gets lost or damaged.
Speak to a mortgage advisor
Navigating the complex world of mortgages can be overwhelming, especially if you’re a first-time buyer. Speaking to a qualified mortgage advisor can provide invaluable guidance and support throughout the application process. A mortgage advisor can assess your financial situation, recommend suitable mortgage products, and help you prepare a robust application. They can also provide insights into the lending criteria of different mortgage providers and advise you on any potential hurdles you may face.
When choosing a mortgage advisor, look for someone who is experienced, qualified, and has a good reputation. Consider seeking recommendations from friends, family, or online reviews. Don’t be afraid to ask questions about their services and fees. A good mortgage advisor will take the time to understand your unique circumstances and provide personalised advice to help you achieve your homeownership goals.
Buy with someone else
If you’re struggling to afford a mortgage, consider buying with someone else, such as a partner, relative, or friend. Pooling your resources and applying for a joint mortgage can increase your borrowing power and make homeownership more accessible. However, it’s crucial to carefully consider the legal and financial implications of buying with someone else and to have open and honest discussions about your expectations and responsibilities. A joint mortgage is a long-term commitment; choosing a co-borrower you trust and can rely on is essential.
Be realistic about what you can afford
When searching for a property, getting carried away and falling in love with homes beyond your budget is easy. However, being realistic about what you can afford is crucial to maximising your mortgage chances. Use online mortgage calculators to understand how much you can borrow based on your income, deposit, and other factors. When setting your budget, factor in additional costs such as stamp duty, legal fees, and moving expenses. Being realistic about your affordability allows you to focus your property search on homes within your reach.
Get a guarantor and/or collateral
If you are struggling to meet the lending criteria for a mortgage on your own, consider getting a guarantor or offering collateral. A guarantor agrees to be responsible for your mortgage payment if you cannot. At the same time, collateral is an asset, such as a property or savings, that you offer as security for the loan. Having a guarantor or collateral can increase your chances of getting approved for a mortgage, particularly if you have a low deposit or a less-than-perfect credit history.
If you’re still struggling, online estate agents SOLD.co.uk are here to help. Contact our friendly team today for an instant valuation.