According to some research put out this month, around 50% of mortgage applications made in 2020 so far have been declined by the bank – and that’s despite the applicants having been accepted for a mortgage in principle before trying to buy.
It’s clearly a real issue for would be homeowners, who are put in the position of losing out on a deal that they were expecting to go through. To help you avoid similar problems with your own property purchase, here are some suggestions for improving your chances of getting accepted.
Be realistic with your budget
Lenders are cautious by nature, and they don’t want to take a risk on mortgages that may become unaffordable for the borrower. Don’t try and stretch your budget to bursting point: look for a home that’s within your price range to make sure that banks don’t see it as an overly risky proposition.
Increase the size of your deposit
A higher deposit is always going to help because it means you’re asking to borrow less money. While first time buyers may be able to get deals at 10 or 15%, you’re going to find better offers and easier deals if you’re able to pay more upfront.
Once you get to the 35/40% point, you’ll start seeing the best rates, and you’ll also make a much more attractive application. You may want to consider holding off for a few years before making your purchase if it’s going to help you boost your savings substantially.
Get to grips with your credit score
We all know that your credit score will be a big element of whether lenders are happy to approve your application. If more than one person is on the application then you will both be expected to have a good score, without missed payments or any red flags such as CCJs. Again, holding off for a while before making your purchase is a good idea if it will give you time to properly build up your score. You also need to make sure the basics are covered up: get onto the electoral register and make sure your credit score doesn’t have any mistakes by using an online tool, like Credit Karma.
Be careful with your spending in the months leading up to purchase
Banks may will look at some of your previous bank statements, not only for proof of your income but also as an understanding of how well you budget your money. While it may seem invasive, you have to accept the fact that there’s going to be some scrutiny of what you’re spending, so manage your finances carefully.
Go for the right type of mortgage
This goes back to the point on affordability. If you opt for a tracker mortgage, then the lender may worry that you won’t be able to cope with rising payments in the future. This doesn’t mean that you shouldn’t opt for it – it’s just a case of balancing your budget properly so that you can present an application that makes sense to the lender.