Getting a new home doesn’t have to be challenging. However, you can be turned down. Here are some ways to improve your mortgage chances to get on the property ladder.
Sort Your Credit Score
One of the most significant factors a lender considers when making a mortgage decision is your credit score. Don’t be disheartened if you have a low credit score because you can easily increase it. Reputable expert accountants can help you build a sound credit file. And sites like ClearScore offer great advice for improving it. Additionally, you can see insights into why your credit score might be low. You can get a mortgage with a low credit score of 550 or less, but you’ll have few options, and it could be more expensive than with a good score over 800.
Offer a Much Larger Down Payment
No matter the mortgage you want, you will need to put some money down. Typically the minimum is around 6% of the amount you wish to borrow. However, you can increase your chances of approval by saving more. For example, if you have things going against you, such as a low credit score, it could be better to offer between 12% and 20% of your requested loan amount. Additionally, the more money you put down initially, the lower your monthly repayments will be. 30% is recommended if you have an exceptionally low credit score.
Don’t Apply for Credit to Improve Your Mortgage Chances
Most people aren’t aware that applying for more credit hurts your chances of obtaining credit. You shouldn’t apply for credit more than once in any six-month period. If you want a mortgage, then you should avoid applying for any kind of credit line, including the following:
- New credit cards and credit accounts.
- Store credit, such as buying a new car or furniture.
- Personal short-term or long-term loans.
Each time you apply for credit, it lowers your credit score by a few points. And they’re only raised by contributing to credit owed. So in most cases, a single hard check won’t lower your score permanently. But applying for credit multiple times in a short period can impact it.
Ensure All Your Income is Legally Provable
A bank or lender has to legally do their due diligence when extending a loan to you. There are many reasons for this, including ensuring you are able to repay the loan. However, they are also bound by strict laws that govern their receipt of monies from clients towards repayments. As a prime example, they must ensure the money you use to repay comes from legal sources. Otherwise, they will be actively engaging in money laundering. And a bank’s accountants are among the best in the world. So don’t apply if there are any discrepancies in your income.
Pay Off Existing Debts
As with any loan, getting one is severely negatively impacted if you have outstanding debts. A bank or lender won’t want to lend you money while you still owe money to someone else. In addition, a bank might see you as unreliable, and they have an obligation to ensure you can make repayments. So clear any debts such as personal loans before applying. If you aren’t sure what debts you have, sites like ClearScore can offer insights into where your debts lie. Additionally, clearing debts will raise your credit score, further increasing your chances.
While it’s a lengthy process, there are many ways you can improve your mortgage chances. These include improving your credit score, refraining from credit lines and paying off debts.