How to secure yourself a mortgage
Aside from raising a healthy deposit, the most obvious thing you can do to improve your chances of getting a good mortgage deal is to ensure your credit profile is up to scratch.
Adrian Anderson, director of property finance specialist Anderson Harris, says: "While rates have fallen, criteria have not noticeably eased and lenders will still be looking for good credit histories.
They get stricter on this the higher the loan-to-value you need because you are perceived as higher risk anyway, without any credit issues."
Simple things are sometimes all that is needed to boost a credit rating. Being on the electoral register is a good start. You should also build up a credit history. "Make sure you have at least two current credit commitments, such as credit cards, which are paid by direct debit each month in full or at least the minimum," says Ray Boulger, senior technical manager at John Charcol.
Sticking with the same address, bank or job can also help. "The longer you have been at your current address, had your current account with the same bank and been with the same employer (or in the same self-employment), the more points you will get," says Boulger.
"The biggest negative will come from any adverse credit, such as county court judgments, defaults and even late payments on a credit card or loan account. Lenders normally want to see three months bank statements and so make sure your account is run properly, for example, with no bounced cheques or direct debits."
Aim to reduce any other personal debt before applying for a mortgage, as your lender will want to know what else you owe and don't apply for credit while a mortgage application is going through.
"If your credit history is quite dire, it may be wise to wait a while before making a mortgage application until you have a chance to improve it," says Anderson. "If you make several applications which are all rejected, this will only make your credit history even worse as each application leaves a footprint."
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.