How can I get a mortgage approval?
Different lenders have their own criteria for mortgage approval, but by and large the general rules are broadly similar. When you make a mortgage application, the lender in question will assess it using information from a few different sources – the data and information on your credit report, information on your application form, and other information they may have if you’re already a customer of theirs.
The information they’re looking for may include:
- Your income: This could include your salary and other earnings, such as income from pensions, savings and so on.
- Your outgoings: This could include credit agreements & repayments, utility bills, other fixed regular costs like childcare, school fees or maintenance costs. They may wish to see an estimate of living costs too, as well as some recent bank statements.
- Projected costs: They may want to assess if you’ll be able to afford repayments if circumstances change – for example if interest rates go up, you lost your job or were unable to work, you had a change in family circumstance that could impact on your finances – eg: more children.
Once they’ve collated all that information, they give you a credit score of their own, which will effectively tell them whether or not to give you a mortgage approval.
Not all lenders calculate the same credit scores – because lenders have different past experiences and expectations, they take different factors into consideration and score things differently. But broadly speaking, the higher your credit score, the better your chances are of getting a mortgage, and one with better interest rates.
This could be things like whether you have kept up to date with payments on other loans and credit cards, the total level of credit that you already have, and how much of that you’re using.
So how can I prepare for a mortgage application?
- Checking your credit report in advance of your mortgage application can give you a chance to update or correct any information that’s incorrect or out of date, or find out what needs improving.
- Lenders like to see evidence that you might be a responsible borrower, and given that late or missed repayments stay on your credit report for at least six years, it’s a good idea to make your repayments on time.
- Checking your Experian Credit Score before you apply for new credit can give you a good indication of how lenders view you based on information in your Experian Credit Report. It can also help you keep an eye on your progress while you maintain or improve your credit score before you apply, such as making sure payments on credit cards and loans are all up to date.
Building up savings for a few months could help protect yourself against drops in income or increased monthly costs. Lenders use greater mortgage affordability checks these days that look at whether or not you’ll be able to make your repayments if your circumstances change in the future, such as having more children, changing job or interest rates increasing significantly.
Guest blog post from Darren Beach from the Experian Experts blog
