This article is contributed by Genistar’s partner, smartR Finance.
There are many things we think about when considering a new home and the thinking behind it usually starts months, if not years, beforehand. Smartr Finance, Genistar’s mortgage partner, help you get ahead of the game with practical tips and advice on how to get your finances in order before you apply for a mortgage.
1. Check Your Credit History
Lenders will examine your use of credit cards, loans, overdrafts, and mortgages in the last six years, including rejected credit applications and repayment history. It’s also possible that your credit report may contain errors or is not up-to-date, so it’s worth taking the time to get it in good shape before you apply as this can affect your credit score which lenders will use for your mortgage application.
2. Up Your Score
Your credit score is determined by several financial factors and can be checked via a credit reference agency. It is possible to improve your credit score by changing credit habits to give you the best possible chance of getting a mortgage. This can include doing things like paying bills on time, reducing spending and paying off outstanding loans. It’s also worth ensuring there are no errors or out-of-date information on your records, which you can ask to be amended.
3. Register to Vote
It’s important to ensure you are on the electoral register as lenders will use this information to carry out identity checks and trace your credit history. If you’re not sure, check with your local council as soon as possible.
4. Still Have a Joint Account?
Check any previous joint accounts that you have had, as other people’s credit history can affect yours. Whether it’s an ex-partner or an old flatmate that you shared a bills account with, it’s worth ensuring that you are no longer linked to them.
5. Manage Your Available credit
It’s important to ensure you are not too close to your credit limit, or in overdraft. It will help if you can show you are managing your debit/credit limits well by not going into overdraft or regularly hitting your credit limit. It’s also advisable to refrain from opening any new credit accounts in the months leading up to a mortgage application.
6. Income vs Expenses
Learn to manage your expenses against your monthly income. This could mean you need to create a budget by logging your income each month and then making a list of monthly expenses. This will show what you have left, and it will help you to see where you can make cutbacks to improve your finances. It’s always useful to review bank statements over the previous 12 months in order to gain a realistic view of your current expenses.
The above steps will assist you in gaining control over your finances and put you in a more favourable position with mortgage lenders. In addition to the above, there are further measures that you may need to consider.
These steps can be time-consuming and in turn lead to additional issues that require attention, so it’s worth taking the time to examine your financial position and give yourself plenty of time before applying for a mortgage. Smartr are an independent mortgage advisory firm who have access to the entire market, so this means you won’t be restricted in which lenders you can access.