Putting yourself in the best possible position for a mortgage is important as you want to be offered the best rate possible. Not only will getting a better rate save you money, but it could also reduce the length of time you are paying it back, lower the interest rate you are paying on the load and potentially allow you to borrow more money. There are several ways you can improve your chances of getting a better mortgage, such as improving your credit score and saving a bigger deposit. Below are five ways to improve your chances of getting a mortgage.
Improve Your Credit Score
When you apply for a mortgage your mortgage broker will run a credit search to see if they think you are worthy of lending money to. When running a credit check on you, it will show the lender how much you are borrowing, whether you are good at paying things back, and whether they think you can afford to pay the mortgage back, as well as many other things. If you have been bad at paying things back, chances are they will not lend you the money. This is why it’s important you work on improving your credit score before applying for a mortgage. Ways to improve your credit score include: reducing the amount of money you are borrowing, paying back more than the minimum payment, not paying any of your bills late as well as many other things. If you want to check your own credit score before applying for a mortgage, the two most popular companies are Experian and Equifax.
Fix Any Credit Report Issues
In some cases, a bad credit score is given because of a mistake on your credit profile. When running a credit check, make sure you look through the information very carefully checking everything is factually correct. It might be that the system hasn’t picked up certain information yet, or that it’s been completely missed. Things to look out for include:
- A debt that has been paid off but is still appearing on your credit profile
- Information that is not correct such as your name spelled wrong
- Out of date information such as an old address
- Information that is wrong due to identity theft
It is always advised that you run a credit check at least 6 months before applying for a mortgage as this is enough time to iron out any issues on your account. If there are any errors that appear which should be there, make sure you contact the credit agency so that they can investigate the error.
Have A Larger Deposit
When it comes to getting a better mortgage rate and improving your chances of getting accepted for a mortgage, a larger deposit will help. By having a larger deposit you are showing that you are willing to risk putting more money down, helping improve the lender’s confidence in you. When putting down a bigger deposit you will reduce the loan to value ratio meaning the bank is also lending you less as you are putting more upfront. If you are worried about not being accepted for a mortgage then why don’t you aim for a 20% deposit instead of a 10% deposit? This may mean you have to save for even longer but in the long run, you will benefit as your interest rate on the mortgage will be lower as well as a lower monthly mortgage payment. It is also worth looking into making biweekly loan payments instead of monthly. You can use tools such as this biweekly mortgage calculator to discover how much time and money you will make by doing this.
Visit A Mortgage Broker
When applying for a mortgage you should always shop around and visit one or two mortgage brokers before deciding which mortgage to go for. A mortgage broker has access to the whole market allowing them to contact different lenders at the same time, offering you the best rate for your situation. By having access to the whole market you will also benefit from them not being biased to one lender, instead, they can look at your financial position and find a lender that is more likely to accept you in the position you are in. For example, being self-employed can seem like a risk to a lender however there are special lenders out there that mortgage brokers have access to, in order to offer you a mortgage. If you don’t visit a mortgage broker, make sure you go directly to a bank and visit multiple companies to make sure they are offering you the best rate.
Lower Your Debt To Income Ratio
Essentially the more debt you have when applying for a mortgage, the less they will be willing to lend you. Instead of saving a large deposit and having a lot of debt when applying for your mortgage, you are better off paying off your debt and having a lower deposit. In some cases, it could be that you just need to be patient and pay off your debt before even considering going for a mortgage. There are two ways to reduce your debt to income ratio – 1. Reduce the amount of debt you currently have which was mentioned above. The other way is to increase your income. By increasing your income your debt to income ratio will be lower therefore a lender will be more likely to consider lending to you.
Overall, the mortgage offer you get is very much down to the lender that you apply for. Mortgages change monthly depending on the company’s financial position and whether they have more or less money to give. If you don’t get the mortgage you want, or you get turned down, don’t stress about it. Take your time to improve your financial position and reapply in the future. As long as you have a roof over your head, there is no rush to owning a property.
What things did you do to improve your chances of getting a mortgage? Did you get the mortgage you wanted originally and did they accept you? How was your experience when getting a mortgage? Let me know in the comment box below, I would love to hear from you.