Looking to optimise your chances of securing a mortgage? Our friends from Metro Finance have come up with some fantastic advice to help and advice:

Mortgages…They are daunting, nobody knows how lenders work behind the scenes, everybody gets declined and the lender wants 18 years worth of paperwork!

That’s sometimes the view of many First Time Buyers, it is a scary time, but there’s no need to think like this. Mortgage lenders do want to lend, if they didn’t, they wouldn’t survive – simple as that.

So how do you put yourself in the best position for a mortgage lender? Not just to get a mortgage, but to get the best possible deal.

And has Corona Virus made things harder?

It’s 2020… The world is waking up to new order… Everything is remote… masks hide fear of mortgage lenders… Enough!

Let’s just cut to the mustard – Has Covid 19 made it harder to obtain a mortgage?

Lenders have tightened up criteria in order to control risk. The risks that some lenders express are unemployment and falls in property values. Whilst some or all the risk opinions may turn into reality, they are opinions. This is important because opinion amongst lenders always varies, which is true today, in this Covid 19 recovery period. When lender risk opinions differ, their products differ.

Even more important for Shared Ownership, arguably there are too many lenders competing for what in reality is a niche sector (in terms of lending volume).

For any sector with an abundance of lenders, you tend to find very healthy competition on rate, criteria, and deposit size and this is still apparent now.

In my opinion and this is based on fact, fact that mortgage business at equal or higher levels to pre-Corona is currently being transacted through Metro Finance – The reduced risk appetite of lenders is, in the instance of Shared Ownership outweighed by the sheer number of lenders and the competition between them.

Here’s some useful tips, to help put you in the best position for a mortgage:

Who lives at your house? When a lender does their credit search, they want to see you on the voters roll, not Tommy Smith who lived there 3 years ago. It’s easy, check for yourself and get yourself registered, this will gain you some valuable credit score points.

Who’s taking all the risk? The lender wants you to take some risk too, in the form of your deposit. For Shared Ownership there are 14 lenders out of 26 who accept a 5% deposit. The best bit, with Shared Ownership it’s 5% of the share not the full value e.g. for a 25% share of a £350,000 home, the deposit can be as low as £4375

How much do you spend on coffee? Maybe £3.50 per day, which equates to £1277 per year! Yes, its nice to have a fancy coffee but what’s better, a shiny new home or a beverage? The more deposit you save, the better the rate will be

How do you look on paper? This is really important, use a service like checkmyfile.com it provides three different credit reports in one, just how lenders would see you on paper. You might think yourself a low risk, but if the credit file says otherwise, that’s all that matters.

See how much you owe, having credit is good for your score, but too much and you’ll look overcommitted.

Check for errors, if anything doesn’t look right, contact the lender or the credit reference agency.

Look for missed payments, bring them up to date and try to keep everything paid on time. Mortgage lenders can still lend with minor blips, but the fewer the better.

No score or low score? So, you’ve checked your credit file and your credit score is in the poor category. You might not need to worry, some lenders, especially the Building Societies operate a more manual approach, ignoring the credit score and focusing more on you as an individual.

Bank statements are boring? Not to a Mortgage lender, they like to see how you run your account, this gives them an idea of how you’ll run your mortgage. Try to stay within any overdraft facility, try not to miss any regular outbound payments. Usually a lender will ask to see the last three months statements

Know your income? Nowadays its rare to find someone with pure basic salary, make it your job to understand your payslips, the bonus, the overtime – are they regular or guaranteed? This makes a big difference to borrowing capacity. You’ll need the last three months payslips, be ready to explain how your income is derived. Same for Self-employed, it’s likely you’ll need two years tax calculations and tax overviews.

At Metro we speak to around 1600 Shared Ownership buyers each month, so we get a good idea of what lenders like and don’t like. You don’t have to be perfect, but you can help yourself and improve your credit score.

In a nutshell:

  • Prove where you live – get on the voters roll and get your name on some bills
  • Low utilisation of credit – e.g. if your card has a £1000 limit, using just £500 of that would be 50% utilisation
  • Pay on time – don’t be late with your regular outgoings, even arranged late payments have a poor effect
  • Fix stuff – any mistakes on your credit file, identify and fix
  • Don’t overdo it – credit is good for your score, but not too much.
  • Be prepared – keep your payslips, P60’s, bank statements, utility bills etc
  • Don’t get too many searches – applying for any type of finance or mortgage results in a credit search, too many can lower your score

And finally, the best advice – speak to a Mortgage Adviser

Why? There are usually around 270 different Shared Ownership Mortgage products, designed to help many walks of life. One or more could be right for you.

 

 

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