The new mortgage rules are in place and the press are happy to let you believe that it is nigh on impossible to obtain a mortgage.
I am not denying that it harder than it used to be but below are some tips on how to make sure your mortgage application stands a better chance of being successful:
1. Use your credit cards responsibly
There is no problem with having credit. Credit cards can even be a good thing for first time buyers as it can show the lender that you have a history of paying bills.
But make sure you pay the bill on time! Late payments will harm your credit rating and can even lead to lenders declining applications. Set up your monthly payments to be taken by direct debit so that you don't forget - even if it is just for the minimum payment.
2. Keep within your overdraft limit
As with credit cards, lenders do not have an issue with you being overdrawn. But you must stay within your overdraft limit.
Overdrafts are common-place these days and not frowned upon. However if the lender sees that there are direct debits being returned on your bank statements and that you have gone over your overdraft limit, your application is very likely to be declined.
So if you run your banking close to the wire each month either monitor this really closely on a daily basis to make sure there are no "accidents" or ask your bank to increase your overdraft limit - but don't use the extra!
3. Make sure you are on the voters roll
Lenders are going to carry out a credit check on you to assess your credit history, see that you have paid your bills on time and make sure that there are no linked or undeclared addresses.
This information feeds into part of their own individual credit scoring system. Being on the voters roll will help to improve your credit rating and increase your chances of that all important "yes" when asking for a mortgage.
To find out how to register, click on the link below.
Voters Roll Information
4. Keep your documents up to date
You are likely to need a mountain of documents when you apply for a mortgage so make sure they are all accurate, up to date and available. This includes:
Driving licence - does this have the correct name and address?
Passport - is it in date and does it have the correct name?
Bank statements - are they registered to the address where you are living now? Can you get hold of 3 month's worth of them?
Proof of address - do you have any utility bills that prove where you live?
Payslips - have you got the last 3 months?
P60 - keep the last 2 of these to hand particularly if you have an element of overtime/ commission/ bonus to your income.
SA302's - if you are self-employed then you need to order the last 3 years of these from HMRC. And don't throw away the covering letter that comes with it as some lenders want that too!
None of these tips are foolproof and individually they will not turn a "no" decision from a lender into a "yes" but by following these principles, you are giving yourself a better chance - and you can't do more than that.
Keep watching for Part 2 which will be posted soon!