How to be the (practically) perfect mortgage candidate
When it comes to getting a loan of any description, the key to success is to convince the lender that the risk of lending you their cash is justified by the reward they can reasonably expect to receive in the form of interest payments. Although mortgages are secured loans, meaning that they are backed by an asset, the fact still remains that the price of an asset can go down as well as up, even if it’s only on a temporary basis, which means that lenders have to feel confident that borrowers can continue to make payments over the longer term, regardless of changes to their personal circumstances or the broader economic situation. Here are four tips to help you make that happen.
Start building up your credit record as soon as you can
As the old saying goes, you need to learn to walk before you can start to run. In other words, you it’s generally best to start small and work your way up to greater challenges and more responsibility. In financial terms, that means that you want to start establishing your credit record as soon as you can so that by the time you are ready to apply for a substantial level of credit, such as a mortgage, you have a long-term track record of using credit responsibly and paying it back in full and on time.
Build up as big a deposit as you possibly can
There are two advantages to being to put down a substantial deposit. The first is that it demonstrates to a lender that you can manage your money well enough to have meaningful savings (or that you have family who can support you). The second is that it reduces the lender’s risk. In simple terms, the greater the amount you can put down as a deposit, the more value a home can lose before a lender’s capital is at risk.
Be careful what shows on your bank statements
These days (post the mortgage market review) banks no longer want just proof of income, they want to see evidence that you can manage your money and while some people may think this is intrusive, it’s a fact of life and if you want a mortgage you will just have to deal with it. In practical terms this means that you will be expected to turn over your bank statements for scrutiny and you may therefore want to think a little about how a third-party might perceive them or, to look at the situation from another perspective, just how much of your lifestyle information you’re willing to share with a stranger. If you conclude that you make purchases you don’t necessarily want to have scrutinised for reasons of privacy, then you may want to think about making them in cash.
Check your personal records are full and accurate
The most obvious record to check is your credit record, even if you have checked it before. Mistakes can happen at any time and if they do you want to get them rectified before you apply for a mortgage. Similarly, you want to make sure that you are on the electoral role at your actual, fixed address, rather than at a hall of residence, your parents’ address (unless you do really live there) or an old address (even if it’s in the same constituency). This not only helps to confirm that you are who you say you are (an important consideration these days) but also that you are organised enough to keep your personal records up to date, which is (another) indicator that you are a responsible individual.
Your property may be repossessed if you do not keep up repayments on your mortgage.