You’ve found your dream home, one of the many online home affordability calculators has told you your savings and salary multiples make it slot neatly into your price range. You’ve shaken the estate agent’s hand – all you need to do is pop to the bank and seal the deal.
Sorry, computer says no. Or, less crushing but still disheartening to hear, not yet. Likelihood of your estate agent holding the keys for you till the loan comes through: zero.
House hunting is a difficult and time-consuming process as it is, without the fear of a rejected mortgage application looming over your head. To avoid delays and to minimise the chances of refusal, get yourself house-ready with these pearls of wisdom…
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If you want a smooth and speedy process, you have to put in the hours. You can’t expect to hand in your application and get on with life as normal. Lenders will ask for all kinds of unexpected information, but you have your hands full with the kids, you’re on deadline, off on holiday. For whatever reason, you don’t have the time or the headspace to work out exactly what they’re after. Or you rush it and they reject you for something as minor as ticking a wrong box on your form.
Make the time and get the right help. An independent mortgage broker will take care of much of the legwork and help cut through a lot of the stress, and it can only help your cause to have a good solicitor and a proactive estate agent on your team. Find a broker, solicitor or accountant that works for you here
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It’s tempting to conveniently forget to add details of a troublesome credit card or gloss over expenses, play down the odd fee here and there, but if a lender finds evidence to the contrary (always assume they will), they will treat it as non-disclosure and invariably investigate further.
Declare everything, hide nothing. If you’re inclined to think a bit of wheeling and dealing is part of the process, best read
up on the penalties of withholding or providing misleading information.
The delay: Your estate agent and broker may be charmed by your likeability factor and satisfied with your earnings, but the bank only cares about details in the paperwork. Having to chase you for missing papers or being provided with different documents than the ones specified will not endear you to a lender.
The solution: Create a neatly organised folder with every bank statement for the past year, and at least three months worth of payslips. If any are missing, get replacements. Your latest P60, SA302s for the past three years if you’re self-employed, utility bills, council tax bills, employment contracts, insurance papers – get your docs in a row!
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The delay: Whether you’re self-employed, or have recently changed jobs, your lender will be looking for the same thing: consistency in your earnings. Income that varies from month to month can unnerve lenders, as does the instability of a job change.
The solution: Try to avoid switching jobs during the application process, but if you have to, be upfront about it and get a letter from your new employer guaranteeing your salary and assuring job security. If you recently changed jobs but for a higher salary in the same field, that’s no problem, but be prepared to go through many hoops if you went from a salaried position to a commission-based one. For the self-employed, the more you declare to the taxman, the better your chances will look on paper. Top tip: get a good accountant.
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The delay: Your mortgage lender will carry out a valuation survey, a process that has been dogged by delays and a shortage of qualified surveyors in recent years, after which there could be further delays if the lender isn’t satisfied the property isn’t worth as much as the sum the borrower is expecting.
The solution: A valuation survey is for the benefit of the lender (even though you pay for it) and isn’t the same as a full survey, which you’ll need to get done anyway as it examines the house in much closer detail. To speed up the process and save you money, ask your lender to upgrade you from a valuation report to a full home buyer’s survey.
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The delay: Many rely on a loan from parents to make up the requisite 10% deposit (17% if you’re a first-time buyer), with many gifting the money to help raise their children’s borrowing capacity. This makes lenders suspect it’s a trick, which, it often is.
The solution: You absolutely need a good solicitor to guide you through the stringent process of the gifted deposit. A good record of personal savings and a regular surplus amount at the end of the month always helps. And you’ll need it too – there’s all the extra costs – set up and survey fees, legal costs and stamp duty and so on.
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The delay: You might think having more money in the bank strengthens your position. But if it’s beefed up by loans or through risk-taking ventures, you may well scupper your chances.
The solution: Avoid taking out any kind of loan (don’t even think about a pay day loan) and any earnings that could be described as gambling. Also, don’t hedge your bets by applying with multiple lenders. Each rejection leaves a footprint on your rating, and the muddier it gets, the longer the process takes. Shop around for the best rates by all means, trust your broker, apply for what’s realistically within your limits, then be patient.
The delay: An unblemished credit history is the key to your dream house, but unless you’re among the few to score a 999 credit rating, your lender will look at every missed payment and default with extreme scrutiny.
The solution: You don’t have a time machine, and there’s not much you can do about some of the defaults that stay on your records for up to five years. Start putting your finances in order from right this moment, if not for an entire year, then at least three months prior to applying. Make sure you don’t go over your overdraft limit, every bill that goes out is paid on time, ideally loans are paid off, if not then certainly no further borrowing, credit cards debts are settled by direct debit, and there’s no sign of excessive spending (no one wants to lend to a spendthrift). And seriously, if you’re not on the electoral role, where have you been?