I’m a Mortgage Expert and Here Are the 11 Little Mistakes That Could Cost You a Loan or Your Dream Home
Homebuyers are likely to face tougher checks when trying to secure a mortgage from banks, fearing that some borrowers may not be able to meet monthly installments as heating and other bills costs are skyrocketing.
But an expert has revealed the 11 little mistakes to avoid that could prevent you from qualifying for a home loan or expose you to higher mortgage rates.
Nick Morrey is Technical Director at mortgage broker Coreco and one of the experts on our extended Squeeze team who are here to help you save money.
Whether you’re worried about paying your bills, need to settle your debts or don’t know what to do with your pension, email us at [email protected]
Mortgage expert Morrey said thousands of buyers could be ruining their chances of landing their dream home with common mistakes, which can easily be avoided.
If you’re already on the ladder, the same blunders could keep you from switching to a cheaper mortgage and leave you stuck on higher rates.
Morrey said: “There are a lot of little things that add up to give lenders the big picture and help them decide if they should give you a mortgage.
“Some of these things aren’t that big on their own, but taken together with other factors, they could cost you a home loan.
“Others are very important and they could sabotage a mortgage application on their own.”
Not to be on the electoral lists
It costs you nothing to be registered to vote and it doesn’t matter if you vote or not, but not being registered is a big red flag for mortgage lenders.
Morrey said: “Being on the voters list is an indication that you are who you say you are and that you have lived at the addresses you say you have.
“Contact your council as soon as possible to register as it can take a few months and some local authorities only update their lists twice a year.”
Moving too often
Of course, there are plenty of important reasons why you might want or need to move, but be careful not to do it too often, Morrey warned.
It is certainly best to avoid doing so in the year preceding the mortgage application.
“Banks have plenty of customer behavior data going back decades, which shows that people who have lived in the same place for a long time are more likely to be stable and have a better track record of following up on payments. .
“Lenders like stability.”
Don’t have a credit card
As long as you use it carefully and always repay at least the minimum repayment each month, a credit card is likely to increase your chances of getting a loan.
“It shows lenders that you can manage credit, in other words that you can borrow responsibly and repay,” Morrey said.
“It’s fine to have the occasional flutter, but make sure you don’t make regular payments to gambling sites or online casinos that will show up on your bank statement.
“Making big bets is also a no-no, as it could suggest risky behavior.”
Using silly or rude referrals when refunding friends
“It can be fun to make a joke about illegal activities or insult a friend by calling them a rude name when paying by bank transfer.
“But remember, your lender will be combing through your account statements when you apply for a mortgage and that type of insult probably won’t impress them,” Morrey said.
Change bank account just before applying
Of course, you want to make sure you’re getting the best deal on everything from checking accounts to insurance, but switching lenders before you apply for a mortgage isn’t a good idea.
“Data from lenders also tells them that people who stay with the same bank for a number of years are more likely to maintain their mortgage payments,” he said.
Take a new job
You may want to change jobs for better pay or benefits, but try to avoid doing this before you apply for a mortgage.
“Lenders like to see a stable employment history over the past two years if possible and they will definitely want to know that you have had a trial period in a new job.”
Use of payday lenders and buy-it-now-pay-later companies
If you use a payday lender or a buy-it-now-pay-later company, it will show up on your bank statement.
“Lenders don’t like to see this because it’s an expensive way to borrow money, they might interpret it as a sign that you can’t live within your means.”
Errors in your address
When you live in an apartment, there may be different ways to write your address.
If possible, try to ensure that the address on the electoral register matches the way it is written in the Royal Mail database.
You can ask Royal Mail to update your address by completing a form here.
“Make sure you use the same format for your address in your mortgage application,” Morrey said.
Forgetting to pay a bill on time
“Set up all your bills to be automatically paid by direct debit to avoid the risk of missing one by mistake,” he said.
“A missed payment will stay on your credit file for six years.”
Using your credit card to withdraw money
While it’s good to have a credit card, it’s important that you use it the right way.
Don’t use a credit card to withdraw money, as this is another sign that you may not be living within your means.
Morrey said: “Also try to ensure that all your borrowing, whether on one card or on several cards, does not exceed 50% of your annual income.
“Also try not to exceed 50% of your credit limit.”
The Sun spoke to a money expert to reveal how to boost your credit score without getting out a credit card.
Credit scores aren’t always the be-all and end-all in the world of money – many Brits need to stop worrying about their credit score.
But knowing what a credit score is and how to build one is still important when buying a house or taking out loans.