The decision to take out a mortgage can very well be one of the biggest decisions you will make in life. Then once you’ve made the decision to take the plunge and do it, you’re faced with what feels like so many obstacles in the form of admin and processes. Preparing for your loan application can be daunting, but we’re here to help you navigate the process in the hope that the load is made a little lighter for you.
First things first: Get your paperwork organised
Lenders will need to see various documents. Get your paperwork together in advance. This will help speed up the process as the lender will have everything they require to assess your application.
Lenders will not accept photographs, screenshots, or summaries of the required documents. Everything must be saved as PDF, and reflect the formal document. Become familiar with a scanning app on your phone or ensure that online portals are active so you can download the relevant items from the respective websites.
Check that all documents show the correct address at the time of application. If not, update the provider to avoid problems that could result in delays. DVLA and financial organisations can take several weeks to update their records.
Your required documents
- Driver’s licence showing your current address
- Utility bill dated within last three months
- If employed; your last three months’ payslips and P60
- If self-employed; your latest two years’ tax calculations and tax overviews, along with two years’ Ltd Company accounts, if applicable
- Most recent three months bank statements
There may be additional documents depending on your circumstances, but a Choice Mortgages advisor will be happy to assist you during a consultation.
Register on the electoral roll
This is the quickest and easiest part of preparing for a mortgage application. Being on the electoral roll at your current address is important because lenders often use the electoral roll data to help identify you. Being on the electoral roll will also help your credit profile.
If you’re not currently registered, you can do so here.
Don’t touch your overdraft
Constantly being in your overdraft may raise red flags for lenders. Try to avoid using your overdraft three months prior to an application, or at least ensure you remain within an agreed limit.
Stop applying for credit
Try to avoid applying for credit in the three months before getting a mortgage – it could impact your credit score. Taking out new loans or increasing your credit card balances will likely reduce the amount you can borrow.
If you need to apply for credit, it’s unlikely that one application will hurt that much, as long as it’s affordable. But if it’s a payday loan or revolving credit facility, some lenders will decline your mortgage application.
It’s also strongly advised to avoid new credit between your mortgage offer being issued and completing your new home. If you do, you will need to inform the lender, which could result in them changing the amount they’re prepared to lend you.
Manage your payments and spending
If you have an existing credit card or loan, it’s important you keep up with the minimum repayments and try not to get too close to your credit limit. Missed or defaulted payments, County Court Judgements (CCJs), payday loans, and clear betting patterns on your bank statements can all lower your chances of getting a mortgage. If you have dormant accounts, consider closing them by contacting the provider.
It’s always worth adding to your savings if you can, even while you’re still looking for a property. Although gifts from the family will be considered, personal savings need to be evidenced, and lenders want to see an accumulation of funds.
Bear in mind that there could be other fees to consider when buying a new home, such as legal fees, stamp duty, survey fees, and administration fees. Remember to take these into account when working out your overall budget.
Check (and maintain) your credit report before you apply
Lenders want to see that you’re able to manage your finances before they decide to offer you a mortgage. One way they do this is by checking your credit file to see if you have a good payment history.
Your credit file lists your current and previous credit cards, loans, overdrafts, mortgages, mobile phone bills, and utility payments, going back over the last six years. There are three main credit reference agencies in the UK, and several companies offer ways for you to see your report and score for free. You can get a view of your profile before applying using this tool.
If you think your credit file information is wrong, you can raise a dispute to get it corrected. Contact the company that registered the error on your credit file, or request that the credit bureau agency query it.
People who are financially linked to you could affect your credit score
You can become financially linked, or associated, with someone if you take out or apply for joint credit, such as a bank account, mortgage, or loan. Because there is a link, lenders will consider the other person’s credit history when you apply for your new mortgage. Any missed payments or defaults they have could impact your chances of being approved.
If you no longer have a relationship with them, make sure you’ve closed or had your name removed from any joint accounts so you’re not linked to them financially going forward.
It’s also worth writing to the credit agencies and asking for a notice of ‘disassociation’.
At Choice Mortgages, we pride ourselves on providing a dedicated, personal service to our clients. It’s more than a business transaction, it’s a means to make life dreams come true. We understand that these processes can be overwhelming but we’re here to help, every step of the way.
Get in touch for a free consultation.