Before you are ready to buy your new home, there are a few things you can do to make sure you are ‘Mortgage ready’. By getting yourself prepared, about 6 months ahead, then when the time comes, you will be in a better position and make yourself more appealing to the lenders.
When you apply for a mortgage, the lender will want to see how affordable the new mortgage would be for you. They will do this by looking at your income, outgoings and you have handled credit in the past. If you can show a track record of keeping your finances in order, then this helps to confirm to the lender that you are responsible with money.
Ask yourself if it was you lending out your money, based on all this, would you lend to you?
If the answer is perhaps not, then there are a few things we can look to do to put you in a better position.
Check your credit score regularly.
Your credit score is what the lenders will use to determine what or if they can lend to you. So it is important to establish early on how your credit score looks. This is often determined by your account history and how responsibly you have run your accounts in the past.
There are various companies i.e. Experian, Equifax, Transunion, who can give you your credit score. checkmyfile.com is often a good place to start, as it includes all of these companies in one report.
This looks at a 6 year history of how you have run all of your credit accounts over that time. It also shows your registered addresses and people who may be financially linked to you.
Sometimes the reports have inaccurate information on them and if this is the case, its important that this gets corrected before you apply for a mortgage, by speaking to the company supplying the credit score directly.
The credit scores tend to run a good few weeks behind ‘real life’ so if you have recently cleared a credit card for example, it wouldn’t update in real time, it would show a few weeks later.
Your credit report is one of the main things that the lender is going to use to determine if they can lend, so its important that we get this looking as good as it can do for you and by checking it regularly, you can see what the lender is going to see.
Register at your address on the Electoral roll
Lenders will ask to see your ID and proof of address as part of their checks, but make sure that your credit file also has you linked to that address too, so that they can trace it easily back to you, which confirms your identity to them.
Show a good account history
Lenders want to know that if they lend this amount of money to you, that you are going to pay it back on time and in full. A great way to show them that you are responsible enough to do that, is by showing them your account history. If you can show them that you have always used your current account correctly, not breached your overdraft, not had returned direct debits, not incurred any charges, then this is a good indication to them that they can trust you with their money.
Arguably, having a credit card and using it correctly can sometimes help your cause too. By showing that you have credit available to you and you are staying within that credit limit and repaying on time can help put you in a good position with the lenders as they can see you are already managing well. Never do a cash withdrawal from a credit card though, as it looks as though you have run out of money in your current account, even if that’s not the case.
If you have a credit card, an ideal thing to do is to use it for something such as fuel/food and pay the balance off in full each month. This way you are using your credit to show a well-run account, but you aren’t then paying interest on an outstanding balance.
Keep up with your repayments
It is so important to keep on top of your finances. Make sure that you make all your payments in full and on time. If you miss payments, then it looks as though that you are unable to run your finances correctly, which is not the impression you want to be giving a mortgage lender.
If you have ‘Bad credit’ don’t apply for more credit
If you know that you have ‘bad credit’, such as missed payments, defaults, CCJs etc, then having multiple credit searches carried out in a short space of time can actually go against you. It’s advisable that you don’t apply for anymore credit and concentrate in clearing your existing debt instead.
Have the correct details on your ID
This may seem trivial, but part of the process your broker, lender and solicitors are going to have to go through is proving your identity. If you still have the wrong address on your driving licence, that is going to delay proceedings whilst you get it corrected.
If it is a name change via marriage / deed poll, then you would also need a copy of the paperwork confirming the change if your ID still has a previous name on it.