How To Get The Mortgage You Want
These days getting a mortgage is a bit like getting a job. You may know you have what it takes to manage it, but unless you communicate that clearly, the chances are you’re going to go away empty-handed.
Understanding The Mortgage Landscape
The Mortgage Market Review reforms
The Mortgage Market Review took place between 2009 and 2012. As its name suggests, it was a major review of mortgage lending practices in the UK.
The result of it was new mortgage rules and much stricter mortgage lending practices. In the old days mortgage applicants might have asked themselves “how much can I borrow”, these days, the relevant question is “how much can I afford”.
In very simple terms, mortgage lenders today will be looking to see clear evidence that you can afford your mortgage over the long term, through life’s changing circumstances.
So, how do you get the mortgage you want? (see also http://www.fsa.gov.uk/about/what/mmr)
Step 1 – Tidy Up Your Present
Getting your financial house in order can have all sorts of benefits in addition to being approved for a mortgage.
In terms of improving your chances of being improved for a mortgage, you want to look at your overall debt situation. That includes what you could call potential debt.
In other words if you have credit and store cards you rarely, if ever, use, it’s time to think about whether or not you really need them. As long as you keep them open, potential lenders will see that you could ring up debt to the credit limit on each card. You may know you’re not going to but they don’t. If you close them off, however, you will make yourself look more attractive to a potential mortgage lender.
Likewise, you may want to put in extra effort to clear off smaller debts, such as personal loans.
In addition to this, make sure that you are on the electoral register (see: Why should you register to vote?) at the address you plan to use when submitting your mortgage application.
As well as ensuring you will be able to vote if there is an election, this is also a major point with lenders.
Step 2 – Tidy Up Your Past
Your financial history is summarised in your credit report or, more accurately, your credit reports. In the UK there are three companies provide credit-reporting services. These are Experian, Equifax and CallCredit.
As they each use their own systems to create their own reports, you will need to get a copy of each report to see yourself as others see you.
On each report, check for any factual errors and, if necessary, have these removed.
Then look for anything, which comes under the heading of “true, but”. In other words, look for anything which is factually correct but paints a misleading or outdated picture of your finances and/or financial management.
You might not be able to get this removed (although if you have resolved the issue, this may be possible, there’s unlikely to be any harm in asking). You may, however, be able to add a note about any special circumstances which led to the problem. As a minimum you can be prepared to explain the situation to potential lenders.
Now have a look at the overall picture. Is there anything you could do to make it look better (per the comments in the previous section)? If so aim to do it before putting in your mortgage application.
Step 3 – Make your application look good
Treat your mortgage application process as seriously as you would treat an application form for a job.
If you’re applying on paper, make sure your writing is at least legible. If you’re applying online, make sure you fill in all the relevant information in all the right boxes.
In either case, be realistic about what you can afford in terms of monthly repayments and be prepared to support your application with appropriate documentation.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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