GETTING the funds together for a deposit is one thing, but actually getting approved for a mortgage is another.
Lenders are set to tighten the supply of new mortgages in the three months to May, according to a survey by the Bank of England.
It comes after a rise in households defaulting on loans over the past three months – with rates to rise even further.
This, coupled with volatility in the global banking sector after the collapse of the US’s Silicon Valley Bank and the takeover of Credit Suisse, means that home buyers and lenders are cautious.
David Hollingworth of L&C Mortgages told The Sun: "The cost of living squeeze and the cooling in house price inflation may see lenders keep a close eye on the type of lending that they attract."
This could mean tweaks to the level of credit score required, especially for those with smaller deposits or equity levels.
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However, this doesn't mean that getting your application for a mortgage approved is going to be impossible.
Nicholas Mendes, technical manager at broker firm John Charcol, said there are several things you can do to get yourself mortgage ready.
We picked Nick's brains to find out what you can do now to boost your chances.
Visit a mortgage adviser
It can be tempting to go directly to a bank or building society for your first mortgage,but doing so could severely limit your options.
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Nick said visiting a broker six months in advance can be useful to help you work out what your maximum purchase price will be.
He added: "Six months could give you time to change any spending habits to potentially increase your maximum borrowing amount prior to offering on a property.
"It also might highlight any genuine problems for you to address in the future."
A broker will be able to review a wider range of products and advise you on the right one for your circumstances, as well as assess any hidden costs which can sometimes be difficult to find.
Remember though, they'll take a fee for their services so you'll need to factor that in to your costs.
Make sure you are on the electoral roll
Getting on the electoral register will help with your credit score.
Nick said: "Being on the electoral roll counts a fair bit towards identifying who you are and your credit score.
"This may simplify the process of providing proof of address and ID to your mortgage lender and could prevent you from having to go through additional identity checks before your application can progress.
Not being on the electoral roll can be viewed as a negative point by lenders, Nick added– even if the reason is that you don’t vote.
Bank statements
You should be aware that lenders may want to see your bank statements.
It is most likely that they will want to see statements from the last three months, but Nick said that some may ask for statements dating even further back.
Nick said there are a few things lenders will be looking for specifically.
He said: "You will want to make sure that you haven’t exceeded your overdrafts or had any of your payments bounce back in this timeframe.
"The lender will also be looking at who you are paying, so you don’t want to be spending on things that lenders will disapprove of."
Get a credit card
While it's not impossible for you to get a mortgage with a poor credit score, you'll be paying over the odds in interest.
You're better off holding out for a few months while you try to improve it.
One way is to continue to use small amounts of credit, like on a credit card.
Nick said: "It may seem strange to suggest that borrowing money will help prove to lenders that you can afford a property, but this is an important tip due to the way many of the biggest lenders assess mortgage applications.
"Regularly using and repaying a credit card is a great way to boost your credit score and demonstrate to lenders that you can handle credit."
Consider how much deposit you can afford
The more money you have, the less money you'll need to borrow and the more attractive you are to a lender
This is because the loan-to-value ratio is smaller and makes you less of a risk to lenders.
So if you've managed to save more money than expected, stick to your budget rather than take out a bigger mortgage.
And if you're in a position to be able to put down a bigger deposit, this could help you in the long run.
Nick said: There is an especially large jump in interest rates for borrowers with lower deposits like 5% or 10%.
"Therefore, if you think you could afford to pay a slightly higher deposit of at least 10% of the overall property value, then it could be very beneficial when it comes to securing a cheaper rate and therefore lower payments."
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Meanwhile, here are six first-time buyer schemes where you only need a deposit as low as 1%.
Plus, we round up six things to do now if your fixed-rate mortgage is coming to an end.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
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