Hoping to buy your first property soon? Make sure you’re ready to be assessed by a lender with our guide to getting prepared for your mortgage application…
Get on the electoral register
This means that lenders can confirm your address. If you’re not on the electoral roll, it will be much harder to get a mortgage, though not impossible. Some lenders will decline an application if an applicant isn’t on the electoral roll.
Make sure you have up to date ID
If you have moved or changed your name in the last few years, make sure your driving licence and passport have both been updated to include your current details.
Get your paperwork ready
If you’re employed, lenders will want to see your last three months’ worth of bank statements and payslips and your most recent P60. If you’re self-employed, the paperwork needed will vary depending on the type of self-employment. However, it will typically include the last two years of your HMRC tax calculations and tax year overviews if you’re a sole trader or self-employed and two years of completed company accounts, HMRC tax calculations and tax year overviews if you’re a limited company director.
Make sure your loans are paid on time
A history of missed payments or even one or two late payments can mean you’re not in control of your finances, which could be worrying to a lender. It’s fine to have a loan, but it’s important to ensure you make the payments on time each month.
Avoid payday loans
Payday loans are unpopular with lenders as the general view is that if you’ve had to take out a payday loan in the past, a mortgage may be too much responsibility for you to manage. It can be a challenge to get a mortgage after having a payday loan. A recent payday loan is certainly a red flag. However, if you had one two to five years ago, you might be OK. A lender will usually assess you on how frequently you used it and whether you’ve had any credit problems in the past. It’s advisable to wait at least two years after your payday loan was settled before applying for a mortgage.
Check your credit report
This is not to be confused with your credit score. Credit referencing agencies will give you a credit score, but this is only their best guess at how a bank might score you. There is no centralised credit score, only individual scores given to you by credit referencing agencies. In fact, you could have a good score and have missed a recent loan payment.
Instead, you can check your credit report, which will give you a clear picture of how you’re performing financially. Checkmyfile will show you six years of your financial history, including whether your payments have been correctly recorded.
Your credit report typically holds a list of your existing credit accounts, such as current loan agreements, credit card accounts and other credit arrangements, such as agreements with utility companies. A credit report will also show whether you’ve made payments on time and in full.
Credit reports help lenders assess your level of credit risk and whether or not you’re likely to be a reliable borrower. Consequently, lenders use credit reports as part of their evaluation when deciding to give you a mortgage.
Take control of your finances
Finally, if you manage your money well and keep your accounts in good order, and your income is sufficient for the amount you wish to borrow, you stand a good chance of getting a mortgage.