BUYING your first home can be an exciting time – but you should make sure you don’t end up falling at the last hurdle.
Nine mistakes could be screwing your chances of getting a mortgage, which is the last thing you want after working hard to get a deposit together.
Lenders need to follow strict rules and be confident you can meet your monthly repayments.
That means you’ll need to show you’re financially stable and can make good money decisions.
Richard Moring, director of RM Mortgage Solutions, said: “Sadly, a lot of people fall at this hurdle because they have made mistakes that are more common than you might think.
“Understanding the process of a mortgage application, what’s good and what’s not, can really help boost your chances of being successful.”
Most lenders will look back at the last six years of your credit history, and around three months of your bank statements.
Here’s what you should watch out for…
Relying too much on Klarna
Making the odd BNPL payment or purchases on your credit card isn’t going to impact your chances of getting a mortgage too much.
But lenders will be suspicious of people who turn to Klarna or other credit facilities too often or who are taking out too much.
Some lenders will start to decline applications if you’re using more than 50% of your available limit.
For example, if you were spending £800 on a £1,000 credit card.
They could also decline you if you’re overusing BNPL for small purchases, as this can reduce your credit score and signal to lenders you might be in some financial difficulty.
Not paying back debt on time
Mortgages are essentially large loans, so lenders want to make sure you can pay back in full and on time.
That means if you’ve got a history of missed or late payments then that will be a red flag for lenders.
This could include failing to pay back overdrafts, credit cards, or hire purchases on time.
If you have a debt-to-income ratio (the amount of your income that you’re paying towards debt) of more than 40%, you’re much less likely to get approved.
Bad credit
Your credit score is a key thing your lender will be looking at during the application process.
If you have a severe credit issue, such as a repossession, county court judgment or a bankruptcy, then you could have your application denied.
Your likelihood of being accepted can depend on the type of poor credit you have – so a large default is worse than a small missed payment.
Lenders will also consider how recent the issue was.
The more recent, the worse the impact it will have on your application.
They might also consider the reason for the bad credit, for example if it was due to job loss or illness.
Some lenders will decline your application immediately if they think you’re too much of a risk, but others could charge you higher fees and interest rates instead.
Before applying, you should check there are no mistakes on your credit report that could harm your application.
Starting a new job
Lenders want to see predictability and stability, so it can make sense to stick with your current job for the time being if you’re applying for a mortgage.
That’s because starting a new job could leave you at risk of being let go while you’re in your probation period.
You may be more likely to be accepted for a mortgage if you wait at least three months after starting a new job.
Some lenders may insist on seeing three payslips when you apply.
However, some are more flexible and could consider your application before you’ve started a new job as long as you have a contract in place or a letter confirming your start date.
Applying too many times
If you’ve been denied on your mortgage application, you shouldn’t apply again straight away.
Applications don’t hurt your credit score but lenders will see them when they search your credit history.
If they see you’ve been denied multiple times before, it may raise concerns for them.
Try waiting a few months before you try again and make sure you work out the reason you were refused.
That means you can fix any issues that were raised ahead of your next application.
Making a mistake on your paperwork
A lot of paperwork will go into your mortgage application so it’s easy to rush through it.
But you could end up costing yourself more time if you make careless mistakes on your application forms.
For example, you might use incorrect names, wrong income figures, or be missing documents.
All of these could lead to rejection or cause delays.
Take your time when filling out your application and read back over it to make sure it’s correct.
Spending too much on fat jabs
You may not realise it, but overspending on weight loss drugs could be hurting your mortgage application chances.
Around two-fifths (39%) of people using private fat jabs say the additional cost has put them in debt, according to a survey by banking app thinkmoney.
The average debt was £1,616, with some people turning to credit cards and overdrafts to cover the costs.
Of course, if you’re in a large amount of debt or spending too much on your credit card this can have an impact on your application.
Lenders may also be wary if they can see large monthly payments in your bank statements.
Jamie Alexander, mortgage director at the broker Alexander Southwell Mortgages, said monthly payments of £200 to £300 could knock up to £20,000 of the maximum loan offered to a first-time buyer.
Other brokers argue weight loss jabs won’t have too much impact as they’re “discretionary” spending that could easily be cancelled.
Some also say most banks and building societies don’t go through people’s bank statements any more.
Either way, if you’re spending on fat jabs it’s worth making sure it’s affordable for you and you’re able to make all your payments without going into too much debt.
Too much gambling
This might seem like an obvious one, but gambling frequently isn’t going to put you in your lender’s good books.
Lenders may ask to see the last few months of your bank statements, and they’ll look for clues you might not be a responsible person to lend to.
Frequent gambling or payday loans will be an obvious red flag for them.
They may also look for large recent expenses like holidays or car purchases, so it’s best to not buy these too close to when you apply for your mortgage.
Not keeping up with life admin
You should also make sure you’re keeping on top of life admin so you can prove your identity.
For example, you should make sure you’re on the electoral roll and also have documents with your current address.
Lenders will also want to be able to trace where your deposit came from.
Not having this information could delay or prevent your application being approved.
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
