With tougher mortgage rules coming into full effect earlier this week, there are three main areas that potential borrowers should evaluate before meeting with lenders, says deVere United Kingdom.
deVere United Kingdom's 'Top Three Ways of Improving Chances for Mortgage Approval' list comes amidst mounting criticism of the Financial Conduct Authority's (FCA) changes from some industry and consumer campaigners. The new checks, introduced on Saturday, will see potential homebuyers having to give further personal details about expenditure when applying for a mortgage in an attempt, says the FCA, to avoid a return to pre-crisis irresponsible lending.
Kevin White, Head of Financial Planning at deVere United Kingdom, the UK division of deVere Group, one of the world's largest independent financial advisory organisations, comments: "Unlike some, we are actively championing the FCA's more stringent processes to help ensure responsible lending.
"Although it has been widely reported, or perhaps misreported, that borrowers will now be 'grilled in three-hour interviews', it is our belief that if people adhere to three basic evaluation points before meeting their lender, there should be no additional obstacles to obtaining a home loan than there would have been before the changes came into force."
According to deVere United Kingdom, the 'Top Three Ways of Improving Chances for Mortgage Approval' are 1) to redeem any credit cards, store cards or personal loans before your application 2) to understand your credit score before the interview and 3) to know and minimise your spending habits.
Mr White explains: "If at all possible, store and credit cards plus personal loans should be cleared as this will indicate a greater degree of mortgage affordability. Also, make sure that you are managing your finances well. Showing a constant overdraft on your bank statements could hinder your mortgage application as it shows that you have not been managing your money well enough. With lenders possibly going back over your bank statements up to six months, getting your finances in order sooner rather than later is a must."
He continues: "The second 'should- do' is to know what does and doesn't impact your credit score, as this is one of the things that will show the lender if you are a 'good risk' or not. For example, if you are not on the electoral roll, then make sure you get on it as soon as possible as this helps with the mortgage application. You can obtain your credit file through various agencies and it would be wise to make sure you check your file for any errors that may be on there.
"On point three – knowing your spending habits – you should be aware of any luxury or major unnecessary expenses or direct debits and scrap them, where possible. In essence, if you are not spending beyond your means, then you should not have a problem getting a mortgage."
deVere's UK Head of Financial Planning concludes: "We're confident that should these check points be achieved, borrowing homebuyers will significantly increase their chances of being approved.
"We base this confidence on experience. With the changes in lending criteria over the last five years, such as 100 per cent mortgages being removed from the market and the removal of the 'self-certification' mortgage, we implemented the new tougher rules over 12 months ago – and have secured a good degree of success for both our UK-based and overseas clients."