Get squeaky clean to get your mortgage
Published 20/07/2014 | 02:30
The ads where lenders promise to offer mortgage approval in "minutes" or "hours" should be taken with a pinch of salt.
There are undoubtedly more mortgages available today than at any stage over the last five years - however, getting mortgage approval is still tricky.
A mortgage is for most, the single greatest financial commitment of their life. Therefore, when you decide you want to get mortgage approval, it's important you get your application right first time without any disappointment or time wasting.
Lenders will only approve perfectly packaged applications which tick all the boxes. So from a borrower's perspective, it's a one-shot only exercise, particularly given the escalating house prices and limited supply of family homes in certain locations.
Just like applying for your dream job, start well in advance when applying for a mortgage. Readjust small but critical financial habits to ensure that your six-month financial track record is squeaky clean by the time you start looking for a home.
It's the simple things that can trip you up.
Going into the red at any time in the last six months without having an overdraft facility in place (even if you're only going overdrawn by €20 for a day or two) will work against you. In some cases, even going overdrawn when you have an approved overdraft facility will be frowned upon by your lender.
Cash advances on credit cards, even on holidays, won't go down well.
Paying rent by cash (even at home) and not documenting the payments is a bad idea. The bank may assume that you didn't pay it and therefore cannot afford your mortgage repayments.
Your bank will ask questions if you have savings but are unable to show any savings pattern. Similarly, if there is any evidence of erratic spending patterns on your current account, this will make it harder to get a loan.
You need to get a raft of paperwork together when applying for a mortgage. This includes evidence of income (such as a P60, payslips, a letter of employment confirmation from your employer), six months of current account statements, existing loan statements including credit cards (if you have them), a record of savings, and documents which provide evidence of your repayment capacity (such as a record of rent paid).
Whilst on the surface this may simply appear an exercise in gathering paper, a blip in any one of these items and you'll probably be declined by every lender. All of the documentation needs to be up to scratch and perfectly presented.
For example, all of your income documents should tally. Although there are some exceptions, your employer must clearly confirm that you are in permanent full-time employment for at least 12 months.
Current accounts should be clean, with no referral fees or unapproved charges. Certain transactions are frowned upon and viewed negatively by lenders.
You should have a demonstrable savings record. If a house deposit is being provided by way of a gift, this needs to be clearly evidenced and supported by an appropriate gift letter.
Any existing or previous loans must have been repaid in full and on time and, again, you must have the documents to prove this.
Trevor Grant is chairman of the Association of Expert Mortgage Advisers
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