The property ladder feels like a climb many are unable to tackle in the UK. The amount we need to save is larger than ever before, with Halifax estimating that the average deposit has doubled in the past 10 years, however, it’s not impossible to get on the property ladder. Schemes such as Help to Buy are supporting first-time buyers more than ever, with 81% of new homeowners using it to purchase a property in 2018.
And, there are some things you can do to improve your ability to be approved for a mortgage, too.
Maximising your chances of being approved for a mortgage essentially means prepping your finances and ensuring they are picture perfect for a mortgage lender’s assessment. Here, we’ve broken down five ways to increase your chances and get the keys to your new home.
1. Clear debts or continue making payments on time
Tackling debt is the first thing you should look into to increase your chances of getting on the property ladder. A clear credit report, with up to date payments and small amounts borrowed is best as this proves you can borrow money responsibly.
Whether you had to take on a quick loan with poor credit or sign up for a high-interest credit card in an emergency situation, these are the debts to tackle first. They are excellent for assisting in a tough situation but you should do your best to settle these before you apply for a mortgage.
Next, you should look into any credit cards you may have and reducing the amount left to pay on these. If you can move what you’ve borrowed onto a 0% interest card, this gives you time to tackle what you owe without any worry about additional charges.
2. Save a bigger deposit
Most people save up to 10% of the value of the house they want to buy as a deposit, but having more to put down can increase your chances of getting on the ladder. This is because the mortgage lender doesn’t have to give you as much and so there is less risk. 20-30% is a great amount to be able to put down as a deposit, but you may need more time to save up this extra money.
3. Look into a higher interest savings account or ISA
Get more for your money and choose an account that gives more back, while you’re saving for that deposit and fees. Truly high-interest savings account aren’t that common at the moment but you can still shop around for the best deal available in the current market. Alternatively, look into a Help to Buy ISA.
This account was created by the Government, and to set it up you must have £1,200 to put away when you open the account, and then be able to save £200 a month. For every £200 you put away, the Government contributes an extra £50 up to the amount of £3,000. It’s worth noting that Help to Buy ISAs are available per person, so a couple with one each could get even more money back to put towards the solicitor fees or costs of buying. Read more about Help to Buy ISAs here.
4. Improve your credit rating
We’ve already touched on clearing your debts but it’s a good idea to look into your credit report and how you can improve the rating it is currently generating. Mortgage lenders will look at your report to determine how creditworthy you are and if it’s not up to scratch this can hinder your chances of getting on that ladder.
While improving your credit rating is a case of time and good behaviour, there are some quick things you can do to give your credit rating a boost:
- Enrol on the electoral register – You don’t have to vote but it provides Credit Reference Agencies, who create your credit report, a confirmed address to use for you, improving the accuracy of the information they hold on you.
- Ensure everything listed is correct – You’ll be able to see a full list of the financial products you use and it’s a good idea to double check that everything is correct; any wrong information could negatively impact your rating.
- Input your addresses for the past three years – If there’s any missing address history, then Credit Reference Agencies and lenders can be less certain that accounts listed on your report actually belong to you. It also gives lenders a picture of how you live, with many preferring a permanent address and stable situation.
5. Accept help
Buying a house is a rite of passage and parents and family may want to help you on your way to achieving such a milestone. Of course, everyone’s family situation is different, but if you feel comfortable accepting offered money or other help towards your goal, why wouldn’t you accept it?. Perhaps Mum and Dad have a spare bedroom you can stay in to save up money faster than you would while paying out for rent on top. Maybe a grandparent has offered to give you money towards your deposit or fees. Don’t be afraid to ask for the help of those who may be able to support you.
Bonus tip – Stop eating avocado on toast
Just kidding.
