4 Approaches to Cutting Your Spending When Applying for a Mortgage

The mortgage application process is undoubtedly one of the most stressful things we can all undergo. And when we are applying for a mortgage we want to get it right so we can increase our chances of being accepted. So what does it really take to ensure that you do this properly, especially when there is so much focus on your expenditure?

Understanding the Affordability Assessment

When you apply for a mortgage, the lender wants to be convinced you can afford it before they lend you the money. The regulations are enforced by the Financial Conduct Authority, which doesn’t just stop mortgage lenders from lending to you, but it’s also about protecting yourself from over stretching your financial limits. As part of the process, the lender will ask you about your spending habits and they will want to see approximately 6 months’ worth of bank statements. You don’t need to completely stop spending before making a mortgage application but you could benefit from making certain changes.

Understanding How To Cut Your Spending in the Right Ways

As part of the mortgage application process, they will look at things like regular household bills and other essential costs, for example, insurance, child care, fees, and commuting, and will also take the cost of your dependants into account, as well as your credit commitments, like loans, car finance, and credit cards. This is why it’s a good idea to get to grips with your expenditure to ensure that you are bulking out those bank accounts properly. For example, when you are looking at your shopping, you can work towards buying the things that you need rather than the things you want, but you can also benefit from getting cashback. A UW cashback card, as well as many other cashback companies can offer very beneficial amounts every time you go shopping. This means you can gradually cut down your shopping expenses over time.

Looking at What To Cut Down On

As part of the mortgage application, they will ask you about one-off spending, regular payments, overdraft use, and if you have any debt. When you are looking at the things you spend on, it’s recommended to cut down on some of the following:

  • Withdrawing cash multiple times in one night.
  • Payday loans or any other short-term credit.
  • Paying to online gambling sites.

Remember, it’s about making sure that you are sensible with your finances, so any red flags such as these can make a big difference.

Keeping Your Credit Score in Shape

Your credit score is one of the big tests of whether you can get a mortgage or not. If you’ve never taken out credit cards, you need to build credit, and you can do this by taking out a card, spending on it and repaying it in full. When you are applying for a mortgage, they will look at your credit utilisation score. Keeping it low is very important, and in order to keep it at a good level, it should be under 30%, but if you go over 50% this can be marked down on your credit report.

With so many expenses we have in life, a mortgage is undoubtedly one of the biggest, which is why the application process can be very stressful, but keep your spending low and your credit score good!

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