Looking to optimise your chances of securing a mortgage? Our friends from Metro Finance have come up with some fantastic advice to help!
So how do you put yourself in the best position for a mortgage lender? Not just to get a mortgage, but to get the best possible deal. Here’s some useful tips, to help put you in the best position for a mortgage:
Who lives at your house?
When a lender does their credit search, they want to see you on the voters roll, not Tommy Smith who lived there 3 years ago. It’s easy, check for yourself and get yourself registered, this will gain you some valuable credit score points.
Who’s taking all the risk?
The lender wants you to take some risk too, in the form of your deposit. For Shared Ownership there are 14 lenders out of 26 who accept a 5% deposit. The best bit, with Shared Ownership it’s 5% of the share not the full value e.g. for a 25% share of a £350,000 home, the deposit can be as low as £4375
How much do you spend on coffee? Maybe £3.50 per day, which equates to £1277 per year! Yes, its nice to have a fancy coffee but what’s better, a shiny new home or a beverage? The more deposit you save, the better the rate will be.
How do you look on paper?
This is really important, use a service like checkmyfile.com it provides three different credit reports in one, just how lenders would see you on paper. You might think yourself a low risk, but if the credit file says otherwise, that’s all that matters.
See how much you owe, having credit is good for your score, but too much and you’ll look overcommitted. Check for errors, if anything doesn’t look right, contact the lender or the credit reference agency.
Look for missed payments, bring them up to date and try to keep everything paid on time. Mortgage lenders can still lend with minor blips, but the fewer the better.
No score or low score?
So, you’ve checked your credit file and your credit score is in the poor category. You might not need to worry, some lenders, especially the Building Societies operate a more manual approach, ignoring the credit score and focusing more on you as an individual.
Bank statements are boring?
Not to a Mortgage lender, they like to see how you run your account, this gives them an idea of how you’ll run your mortgage. Try to stay within any overdraft facility, try not to miss any regular outbound payments. Usually a lender will ask to see the last three months statements
Know your income?
Nowadays its rare to find someone with pure basic salary, make it your job to understand your payslips, the bonus, the overtime – are they regular or guaranteed? This makes a big difference to borrowing capacity. You’ll need the last three months payslips, be ready to explain how your income is derived. Same for Self-employed, it’s likely you’ll need two years tax calculations and tax overviews.
At Metro we speak to around 1600 Shared Ownership buyers each month, so we get a good idea of what lenders like and don’t like. You don’t have to be perfect, but you can help yourself and improve your credit score.
In a nutshell:
Prove where you live – get on the voters roll and get your name on some bills
Low utilisation of credit – e.g. if your card has a £1000 limit, using just £500 of that would be 50% utilisation
Pay on time – don’t be late with your regular outgoings, even arranged late payments have a poor effect Fix stuff – any mistakes on your credit file, identify and fix
Don’t overdo it – credit is good for your score, but not too much
Be prepared – keep your payslips, P60’s, bank statements, utility bills etc
Don’t get too many searches – applying for any type of finance or mortgage results in a credit search, too many can lower your score
And finally, the best advice – speak to a Mortgage Adviser. Why? There are usually around 270 different Shared Ownership Mortgage products, designed to help many walks of life. One or more could be right for you.
HELPING YOU ON THE PROPERTY LADDER
Many people think they can’t afford a new home, are you one of them? Well, with Help to Buy, which is a Government-backed scheme, you might be surprised. This great initiative is designed for those with a smaller deposit but still with a desire to own their own home.
Here at Open Door we’ve got several great developments offering the Help To Buy scheme but before we tell you about them here’s the facts on Help To Buy:
It’s only available on new build homes – perfect for Open Door schemes.
You put down a deposit of at least 5% of the value of the property.
The Government lends you up to 20% of the property’s value as an equity loan (after 5 years you start paying interest on this loan).
You take out a mortgage on the rest of the property’s value.
Here’s an example: A house is priced at 182,500. With Help To Buy, this could be how it would work:
Deposit: £9,125
Government loan: £36,500
Mortgage: £136,875
*illustrative purposes only and dependent on your own financial position.
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