Struggling to get a mortgage? Seven tips to help you improve your chances

Financial planning for getting a mortgage
Be sure to stay within any overdraft limits and remember that now is not the time to take out a new car loan. Photo: Getty

If you’re looking to take the first step onto the property ladder but finding it difficult to get accepted for a mortgage, you’re not alone.

New research from Aldermore bank found only one in five first time buyers were able to secure a home loan on the first attempt. This compares to nearly half (48%) that were able to do so pre-COVID.

Further findings reveal almost one in four (38%) were rejected for a mortgage once, and almost half (43%) were rejected for a mortgage multiple times. Prior to the pandemic, only a third (36%) reported being turned down once, and only 17% said they had been turned down more than once.

Why are first-timers getting rejected?

According to the research, the most common reason why first time buyers were turned down was a poor credit history, while the second most common reason was not having a large enough deposit.

Separate findings from financial comparison platform NerdWallet paint a similar picture. They show that COVID-19 has halted home ownership plans for three in 10 prospective first-time buyers.

John Ellmore, of NerdWallet, said: “The pandemic has created challenging conditions for the UK mortgage market. The resulting economic volatility has led some providers to tighten their lending criteria and, as such, some first-timers may find securing a mortgage more challenging than they may otherwise have done.”

Things could be looking up

Encouragingly, over the past few weeks there’s been a significant increase in the number of mortgage deals available, according to financial analyst Moneyfacts.

This will be welcome news for those trying to get a foot on the ladder.

But while having a wider range of deals to choose from should make life easier, there are also a host of simple steps you can take to boost your chances of getting your first application accepted.

The key is to be proactive in your efforts to make the dream of home ownership a reality.

1) Improve your credit score

Having a good credit rating can have a big impact on your chances of making a successful application, so you need to ensure your record is in tip-top condition.

You can get a copy of your report by contacting one of the main credit reference agencies: Equifax, Experian or TransUnion.

Rachel Springall, a finance expert at Moneyfacts, said: “Make sure everything is accurate and up-to-date. If you find any discrepancies, get these corrected.” 

Other simple tips to help you boost your credit score include paying off bills and ensuring you never miss any repayments. Setting up direct debits can be a good way to do this.

Watch: What do stamp duty cuts mean for buyers and house prices?

James Padmore, from comparison site Comparethemarket.com, said: “Just a few small changes can make all the difference, such as getting registered on the electoral roll, not opening too many accounts at once, and keeping your credit card balance 25% under the limits.”

Also disassociate yourself from any financial ex-partners if, say, you had a joint bank account in the past. That way, you can ensure another person’s credit rating does not harm your score.

2) Get your paperwork in order

Set aside time to gather all your documentation. Ideally, do this months ahead of starting your application.

By being organised, if anything is missing, you have time to search for it or, where possible, request replacements.

Andrew Montlake, of independent broker Coreco, said: “Make sure you have your last three bank statements and three months of payslips to hand as lenders will want to see these to check affordability. If you’re self-employed, ensure your accounts are fully up-to-date. Lenders will also want to see proof of the deposit monies. If the money is being gifted by parents, the lender will need confirmation of this in writing from them.”

3) Be careful with your spending

As lenders will go through bank statements with a fine-tooth comb to check you will not be overstretched keeping up with the monthly repayments, be mindful of your spending in the run-up to making a mortgage application.

Springall said: “It’s worth reining in your spending in the months before applying. If possible, avoid making big-ticket purchases at this time.”

Be sure to stay within any overdraft limits and remember that now is not the time to take out a new car loan.

Montlake adds: “Go through your own budget planner so you know exactly what monthly mortgage payments you can comfortably afford, and what non-essential items you can live without.”

4) Clear as much debt as possible

As lenders will take into account any outstanding debts, before applying for a mortgage aim to clear as much as you can of what you owe. Better still, become debt-free.

Springall said: “If you can’t do this, look carefully to see how much of your income is going towards repaying debt. If it’s a significant amount, this could sound the alarm bells with a potential lender, and you could get rejected.”

5) Save hard

Ahead of making a mortgage application, you need to focus your efforts on saving up the biggest deposit you possibly can.

Montlake said: “The larger the deposit you amass, the greater choice of mortgage deals you’ll have available to you.”

Don’t forget there are also a lot of fees associated with taking out a mortgage, so you need to ensure you have sufficient funds to pay these, too.

6) Make use of a broker

When applying for a home loan, especially as a first-time buyer with little experience of the mortgage market, it’s worth speaking to a professional broker. He or she will be able to look at your situation and navigate the mortgage maze to help find deals that suit your circumstances.

Don’t just rely on your bank as they can only offer their own limited products; a broker can scour the whole market.

7) Be honest

When making a mortgage application, don’t try to hide anything or "forget" to disclose any relevant information you feel may jeopardise the home loan.

Montlake said: “This is one of the worst things you can do, and will always be picked up at some stage. Speak honestly and openly to a broker who will always help you present your application to a lender in the best possible way. A broker will know how to package up your application to give you the very best chance of being accepted first time.”

Watch: How much money do I need to buy a house?

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