How to pass the Mortgage test
In this modern post-recession age, when lending criteria are as strict as they’ve ever been, more and more people are finding it harder to secure a mortgage. To pass the mortgage test you will need to show lenders that you can meet their exacting criteria.
Seems harsh? Maybe. But help is at hand: here are our top tips on how to increase your chances of securing the mortgage deal you want.
Improve your credit score
Seems easier said than done, but there are short-term ways in which you can improve your credit rating. Remember, your credit score is based on your record of meeting your financial obligations; credit card and loan repayments, overdrafts, mobile phone bills and even some of your household bills.
So once you’ve decided to purchase a new property, make sure you meet all of your repayments in a 12-month period prior to applying. This will ensure you are considered less of a lending risk.
You can request your credit score for free from some reputable providers (through a trial), and if any of the details on there are wrong it is ESSENTIAL that you rectify them as soon as possible.
Pay your bills on time!
The easiest way to improve your credit score is to pay your bills on time. This will ensure no misdemeanours find their way onto your record. Even if you have to live a minimalistic lifestyle for a few months, it is imperative that you don’t defer on any payments that could see your credit rating decrease....and your chances of securing a mortgage disappearing down the drain.
Don’t apply for another form of credit prior to your mortgage application
Every time you apply for credit – whether a personal loan, credit card, new mobile phone contract – it is registered on your file.
The more applications you have on your credit fill in a short space of time, the more ‘desperate’ it appears you are to borrow money. This sets mortgage lenders’ alarm bells ringing straight away – particularly if it’s a payday loan or similar high interest credit.
Have your proof of income ready
All mortgage providers will want to check your income and your employment status. Speed up the process by having all your documentation to hand:
- Last three months' bank statements & pay slips
- P60 tax form
- Last three years' accounts or tax returns
- Proof of deposits
- ID (passport/driving licence)
- Proof of address (utility/credit card bills)
Make sure you’re on the electoral register
Quite a surprising one this, but mortgage lenders use the electoral roll as a way of confirming your identity. Hence if you’re not on the register, they cannot prove who you are or where you live.
Your local council will have this information, so make sure you contact them if you haven’t voted before to ensure you’re registered. And remember it can take up to a month to be added, so prepare in plenty of time for your mortgage meetings.
You can register to vote on the gov.uk website.
If you’re self employed....
You’ll notice that some of the criteria outlined above aren’t really ideal if you are self-employed. It’s harder to prove that you have a regular, stable income – and thus you put lenders on edge.
But if you can prove a steady flow of income, and your credit rating is good, then you can be successful in applying for a mortgage. Just don’t be surprised if you get rejected if you are just starting out – you will need to build up a record of regular income to have success.
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