How to Increase Your Chances of Getting a Mortgage
Let’s face it, we’re currently living in an age in which the ‘millennial’ will find it harder than ever to get onto the property ladder and purchase their very first home. People from a generation or two back may have lived through some tough times, but buying a house back then was much, much, much easier than it is right now. While, thanks to the worldwide global financial crisis of 2009, banks and lenders are far stricter and cautious when it comes to mortgages and loans, if you put in the preparation, do your research, and put in the hard work, it is still more than possible to snag yourself a very reasonable mortgage deal. Here are some tips to help increase your chances of getting a mortgage.
Get a credit score
Sadly, we’re living in a world where we are encouraged to apparently increase our chances of getting into debt. Rather than simply paying for things with cold, hard cash, or with our debit cards, we’re encouraged to take out credit on a variety of things. Why? Because in reality it is crucial that you have a credit score before you approach a bank or lender about a loan or a mortgage. People assume that not using a credit card or not having a credit score is going to be beneficial when in reality the exact opposite is true. Having no credit score is just as bad, if not worse than, having a poor credit score. Mobile phone contracts and credit cards are great ways of building up your score, though you need to be careful. More on that next.
Build your score sensibly
When you get a new credit card it can be tempting to make big and lavish purchases, especially with 0% interest offers and such like. The problem is that eventually this money will need to be paid off. If you miss a payment, this shows potential lenders that you’re not great at managing your finances. If you miss credit card payments, this tells the banks that you may miss mortgage repayments to them. Would you risk lending money to somebody if there was a strong possibility you wouldn’t get it all back? No, and neither will the banks. Make sensible purchases, and the second your credit card is activated, make sure you set up a direct debit to pay off a certain percentage of your card. Most people go with a minimum repayment because the sum is so small that they don’t miss the money, and it still covers their backs. Never miss a repayment and don’t pay off cards too quickly.
Save for a deposit
To buy a house you need a deposit. 10% is the norm, though some go with 5%, while others go with 20%. The bigger the deposit, the better the mortgage deal will likely be. This is because it shows that you are good at saving, and it helps you to get a lower interest rate. If you go with an even bigger deposit, of say, 35% – 40% of the property’s value, you’ll likely be offered some very enticing deals indeed.