If you are looking for a mortgage, your chances of success will be better if you do not give the lender easy reasons to turn you down. By their nature, mortgages tend to involve large sums of money, and lenders take extra care before agreeing to lend the money. The following are some of the things you should NOT do if you want to improve your chances of getting your mortgage.
1. Do not apply to multiple lenders
Initial processing of mortgage applications normally involves carrying out a credit check. The fact of a credit check being carried out becomes part of your credit record. Having multiple checks on your record with no corresponding mortgage can damage your credit score. Therefore, it is best to apply only to a lender who is likely to agree to offer you a mortgage. Independent mortgage advisers will know which lenders are most likely to lend you money, based on your individual circumstances, and they can help you avoid making multiple loan applications.
2. Do not try to borrow too much
Lenders will normally cap loans based on the value of the property being mortgaged. What is less well known is that they may also cap loans based on your disposable income (the amount left after you meet all your other financial obligations). Before applying for a mortgage, spend time working out how much money you have left each month after paying all essential bills. Next, add in the additional expenses you will have when you own your new home (e.g. insurance and taxes). Deduct that from the amount of money you have left each month. Your future mortgage payments will have to come out of this new total.
It is wise to restrict your planned mortgage payments to no more than 70% of your spare income. Even if you find a lender willing to lend you more than you could comfortably manage, do not be tempted to take a loan so big that it could mean decades of stress trying to meet repayments. Going any higher than 70% of your spare income could cause you big problems if your circumstances change, or if you are hit with a major, unforeseen expense. Going any higher than 70% also makes it harder to get a mortgage.
3. Do not open new lines of credit
That means you should forget about getting new credit or store cards. When calculating your risk, lenders may factor in the total of the credit available to you on all your cards, rather than the amount you actually owe. You should also avoid entering into new hire purchase or leasing agreements.
4. Do not change your job
Unless you have the chance to take up a new job that will substantially increase your monthly income, it is best to stay in the same job you have until your mortgage has been issued. Having a stable employment history benefits your application.
5. Do not omit relevant information from your application
As part of the process of deciding whether to grant you a mortgage, the lender will calculate the risk of lending you money. Part of that calculation includes looking at your credit history. You will be asked to submit details of all existing loans on your mortgage application. The lending company will verify existing loans from other sources, so it is important that the details you put on your application correspond with what will appear in other credit reports. Any discrepancies will almost certainly result in your application being declined.
In summary, using an independent mortgage adviser can be the best way to get the mortgage you need. Your adviser will help with your application and advise you on how much you can comfortably borrow. Getting refused by any lender makes it much harder to find another one that will give you a mortgage.