First-time buyers are being urged to make sure their ‘mortgage fit’ to avoid being beaten in the race to secure their first home.
Builder Barratt Homes says getting a mortgage remains the biggest issue for customers, with many first-time buyers not aware how the barriers can be overcome.
Adrian MacDiarmid, Barratt Homes’ head of mortgage lender relations said: “Lately we’ve had a few signs that things are finally starting to ease up, including the introduction of the Government backed 95 per cent mortgage scheme NewBuy.
“So we’re encouraging potential buyers to make themselves as attractive as possible to a mortgage provider and have released our top tips to making yourself ‘mortgage fit’.
“A person’s credit score helps lenders decide not only whether you are eligible for a mortgage but also how good the interest rate is that you get. It can be affected by a number of things, from missed bill payments to lack of information, which you might not even consider.”
He recommends, first of all, that potential buyers check their score. This can be done quite easily online with the two main credit reference agencies, Experian and Equifax.
Ensure all information is correct and if it isn’t, write to the agency and request that they change it.
Secondly, Barratt Homes say understand your limits.
If you have existing credit such as credit cards and loans, you must ensure that you keep up with the minimum repayments.
If you are really struggling to pay, speak to your lender as this may show favourably on your credit score.
Similarly try not to exceed 30 per cent of your credit limit, if you do, lenders may view this as ‘excessive’ debt.
Family connections come is tip three.
Details of your family’s credit score are not kept on your file, so long as you don’t have any joint finances.
So if a family member, partner or housemate has a poor credit score, keep your finances rigidly separate. This includes joint accounts and bills under both names. Any joint financial issues where they score low could stop you getting a mortgage.
Many people don’t realise that no credit history can often mean no mortgage. Living without credit cards or a mobile phone might be idyllic but from a lender’s perspective that makes you invisible so tip number four is to get a credit history.
By taking out a credit card and using it regularly (ensuring you pay off the bill at the end of the month with a direct debit) you will begin to build a credit history. Another good way to build your score is by taking out a mobile phone contract instead of using pay-as-you-go.
As important as having a credit history is actually existing. Make sure you are listed on the electoral roll. It doesn’t mean only that you can vote, it’s a legal record that you live where you say you live. Without a credit history or electoral roll registration you are invisible to lenders.
The last tip is to apply for a mortgage. It sounds simple, but one slip up on the application form could scupper your chances of securing a mortgage. This could be from a simple mistake, such as putting a salary of £3,000 instead of £30,000 but it could also be from inconsistent information (even on other mortgage application forms) as this can flag up possible cases of fraud and could slow down or stop your application altogether.
Numerous applications in a short space of time could have a negative effect as lenders share information and will worry about why you have been rejected before.
Adrian added: “By following these steps now, purchasers should find that they are in good stead for securing a mortgage when the time comes to getting a foot on to the property ladder.”