What Do Mortgage Lenders Look For?
The process of obtaining a mortgage is often likened to a job interview, because essentially, you need to impress the mortgage lender in front of you, in order to be in with a chance of them accepting you. Lenders look at your financial history to determine whether you will be a suitable borrower, as entering into an unsuitable mortgage deal will be damaging for both them and you.
Mortgage lenders look at an array of things to aid their decision, from your credit score to your monthly outgoings, as this gives them a true indication of your current financial situation. You may worry at the thought of lenders scouring through your bank statements and payslips, but looking at the wider picture can really benefit you, particularly if your credit score is not an accurate depiction – which is more common than you may think.
Your Credit Score
Although your credit score is not solely relied upon, it is certainly the biggest indication of your loan repayment habits. Lenders tend to look at your credit score to determine the amount they are willing to lend to you and whether you should be trusted to repay your loan, so having a poor credit score will immediately put you on the back foot in your mortgage application.
A common misconception with credit scores is that not actually borrowing any money is a good thing. While it probably makes sense that never having to take out a loan is positive, it means you won’t have any repayment history for a lender to assess. The smallest thing such as taking out a credit card and making regular repayments can help build your credit score and keep it at a good point. Obviously, using your credit card for things you can’t actually afford can have an adverse effect – so you need to treat it with care and caution.
The best way to keep your credit score looking good, is by paying any loans you have on time and in full.
The Size of Your Loan and Deposit
An important thing a lender will consider during your mortgage application is the size of the loan you require. This is the money they will be giving to you and it will be taken into consideration during every check a lender is likely to do, as the likes of your monthly income will be weighed up against the amount you will have to repay.
The deposit you are able to offer towards your mortgage is extremely influential in your acceptance. The bigger your deposit, the less a lender will have to give you. The more you can save for a deposit, the better.
Your Employment Status and Income
Another good indication of whether you will be able to afford to repay your mortgage is your employment status and your income as a result. Without having a job, it’s unlikely that you will have a steady income, so a lender is going to be put off straight away.
Being employed with a good level of monthly income is a combination that will please any lender. They may also check how long you have been in your job, as lenders are unlikely to offer a mortgage to someone who is in the probation period of employment, as your job is not yet guaranteed.
As well as seeing what is coming in your bank account each month, lenders also like to see what is going out and whether you will be able to afford mortgage repayments on top of your current outgoings.
When you are looking for a mortgage, it’s important to assess your outgoings yourself and factor in the repayments, to see if you can afford a mortgage. As much as you may be desperate to get your mortgage application approved, not being able to afford it will damage your likelihood of getting accepted for credit in the future.
Your Presence On The Electoral Roll
On the face of it, being on the electoral roll sounds as though it has nothing to do with your mortgage. But it can be a really important factor that lenders look for and it could be the difference between getting accepted for a mortgage or facing rejection.
Lenders use the data provided by the electoral roll to perform numerous identity checks – to make sure you are who you say you are. Being on the electoral roll is completely free and you can check whether you are on it by a simple call to your local council.
Strike The Right Balance
Mortgage lenders are not looking for one particular thing, they are looking for numerous factors to be in check at once. Even if your credit score is strong if your deposit is low, a lender is not likely to think twice. It’s important to remember that there is not one determining factor and you need to strike the right balance between them all before you have a chance of getting accepted.