When applying for a mortgage, getting your paperwork in order is where much of the legwork comes in.
There are several things you need to include in order to ensure a successful and smooth application. These are:
- Three months of payslips
- Your P60 from the previous tax year
- Three to six months of bank statements
- Evidence of any other sources of income
- Proof of address
- Details on any credit cards or loans
We actually provide a more detailed list of your paperwork here, and even made a video about it featuring Bow the Boston Terrier! The list of paperwork differs slightly if you are a freelancer or contractor, which we covered in another post. But sometimes, you can have all the necessary paperwork and still find your application is rejected. These are usually due to mistakes or misunderstandings in the application itself, so we’ve decided to publish this list of the biggest mistakes in mortgage applications! ‘Biggest’ in this case encompasses both most common mistakes, and those with the greatest consequences.
We all have a credit score, and it is important to know yours before you apply. A poor credit score could hinder your application, meaning you get a more expensive deal, or can be used as a reason to reject your application entirely. Your score can be affected by several factors, such as late payments on bills or credit cards. It’s important that you check your credit rating early on so that, if your score isn’t great, you can try to do something about that in advance. If you have a bad credit rating due to something that isn’t your fault and there is still a dispute open, you should wait until that dispute is resolved before applying for your mortgage. An open credit report dispute is often a warning sign to lenders, and they may not proceed with your application.
The idea of moving to a new property and the purchases associated with it might make you think that it’s a great time for a credit card to assist in those purchases. However, hold off on doing this until after your application is approved. Credit card applications tend to have an immediate negative effect on your credit rating, and combining that application with a mortgage application could throw up some red flags causing delay or even rejection.
Misleading the lender
It might be tempting to skew the truth of your situation to give yourself a better chance in your application, but don’t do this. The repercussions could be quite dramatic. First of all, the financial requirements from mortgage lenders are there for a reason – to make sure you can afford the mortgage. If you leave out financial information you could end up with a mortgage that you can’t afford, putting your home at risk.
There is also the important fact that lying about your mortgage application is mortgage fraud – specifically Opportunistic Mortgage Fraud. If caught, the courts will see the applicant as having committed a money laundering offence. You can find out more about mortgage fraud here.
Assuming you need you and your spouse’s names on the application
Joint mortgages are a great way to get a more affordable mortgage (we talked more about this in detail in our Joint Mortgages blog, here), but that doesn’t mean they are a necessity. Getting a joint mortgage with both you and your spouse’s name on might be symbolic of your shared responsibility, but it could be detrimental to getting a good mortgage deal approved.
If one of you has serious credit score issues (either from excessive debt, failing to pay bills in time, identity theft etc.) or income discrepancies, it would be cause for concern among lenders. Although there are several disadvantages in applying for a mortgage under just one name (namely, that only one income is taken into account), in certain situations it could make more sense. Just keep in mind that, depending on your application, the lender might take your spouse’s income and debts into consideration anyway.
Applying for a lot of mortgages
It’s perfectly reasonable to have had several mortgages in the past or to be looking for a new mortgage if a previous application gets rejected. But be careful about how many mortgages you are applying for, especially in a short period of time. Each time you apply for a mortgage, loan, or credit card, it leaves a sort of footprint in your credit history. Too many and it will be seen as a red flag to lenders.
If you’ve already applied for several mortgages and have been unsuccessful, it is likely in your best interest to find a broker who can help you with your application. Any more applications that don’t address the reason your applications are not being approved could lead to long-term trouble. Meanwhile, a broker can help you find your ideal property with the best deal possible, thanks to years of experience and many more lenders than the high street can offer (there’s a chance we’re talking about ourselves, here).
Underestimating total costs
Do your calculations! Buying a property can have more costs associated with it than you might think. One of the most common mortgage application mistakes – especially with first-time buyers – is not factoring in all the expenses when calculating affordability. There is a lot to think about: building insurance, ground rent/lease, maintenance, council tax, stamp duty, bills, surveys… the list goes on. We covered what hidden costs you might come across in our House and Home blog.
You also need to keep in mind any changes in interest rates. Variable rate mortgages have increased in price since November due to the Bank of England increasing the base rate from 0.25% to 0.5%.
Not using a broker
Yes, we are well aware how this sounds, but the truth is the truth. Brokers (yes, like us) have the experience and expertise to track down the most affordable mortgage deals available to you. We can also help out with your application, making sure that none of the above factors become a problem for you. Our interest is in the successful purchase of your property and our step-by-step guide to the mortgage application process will leave you feeling more empowered for future investments/purchases. In most cases, using a broker will actually save you money in the long run.
Hopefully, these tips will have given you some ideas of what to look out for when preparing your mortgage application. If you have any questions about your application or would like some mortgage advice, please don’t hesitate to get in touch via our contact page.