When applying for a mortgage?
If you are applying for your first mortgage, it is likely you have heard people talking about your credit rating, and how this will play a part in if you can obtain a mortgage. Similarly, for remortgages, your credit score, at the time of application, will be factored in. How important is a good credit rating? And what can you do to ensure yours is tip-top?
This does not constitute advice and advice should be sought in all instances before acting on it.
Your property may be at risk should you be unable to maintain any agreed mortgage payments over the term agreed.
Applying for a mortgage
First thing to note is that different lenders have different criteria when it comes to their application process, so if you don’t meet one lender’s criteria, you could likely meet another’s. Whilst on the whole, mortgage lending is regulated, there are certain variables that set lenders apart from others and each may judge your application slightly differently.
Generally though the lender will judge your mortgage application on your employment status, size of the loan, your regular monthly outgoings, affordability of the monthly mortgage payments, and your credit rating.
Typically, the last three months of your bank statements will be under scrutiny, so prior to a mortgage application, it can pay to tighten up your finances to stand the best chance of achieving the deal you desire.
The purpose of the credit score
The credit score takes into account your financial history and how reliable you are at meeting financial obligations. This in turn enables a lender to assess their risk with ensuring your mortgage payments will be made, in full, and on time.
If you miss credit card payments, venture over your overdraft limit, or fail to meet other debt facilities, this could affect your credit rating.
Things to help your credit score
In the months leading up to applying for a mortgage, the following can help improve your credit score:
- Ensure you pay credit cards on-time
- Don’t go over your arranged overdraft limit
- Don’t apply for new credit, if possible
- If you have to apply for new credit but get rejected, don’t apply again – this will make your borrowing look frantic
- Get the right mix between available credit and used credit – 50% is a broad guideline to show that you are not maximising all your credit resources
- Take into account any financial facility from previous relationships
- Joint bank accounts, credit cards or mortgages will be taken into account.
- Late payments from an x-partner can affect your credit rating going forward, so it’s important to sever those financial ties in advance of a fresh application.
Working with a mortgage adviser can help you to secure the mortgage you desire.
A mortgage adviser will be able to further explain ways to improve your credit score if needed, and they are familiar with the lenders who offer more flexibility with this part of the application.
Typically, a good credit score may lead to better rates and a faster mortgage arrangement. Unfortunately, a poor credit score can lead to a lack of options, including higher rates.
Need a mortgage? Speak to Chris
Dental & Medical Financial Services help doctors and dentists to find the best rate mortgages for their dream home. Call Chris for bespoke advice.
Tel: 01403 780 770