As life experiences go, getting approved for a mortgage is up there as one of the big ones.
It is an event that leads to joy, excitement and a huge sense of achievement when you finally receive the keys to your very first home, but it can also be fraught with pitfalls and setbacks.
Many of the obstacles encountered on your mortgage journey can be a result of unfortunate timing, administrative delays or other factors beyond your control.
However, there are also important boxes that applicants fail to tick because of certain behaviours or actions on their part.
To prevent this and make the process as smooth as possible, we’ve compiled a list of nine common mistakes that might prevent you from getting a mortgage – as well as tips on how to avoid making them.
9 common mortgage mistakes to avoid
As you prepare to take steps towards buying your first home, it’s important to do lots of preparation to ensure you’re ready to take on the challenges that a mortgage application may bring. Here is a rundown of some of the more common mistakes people make, so you know what to look out for.
1. Failing to meet bill payments
This is arguably one of the biggest mistakes you can make before making your foray into the world of mortgages, particularly in the six months prior to applying.
Having insufficient funds when a direct debit bill payment is due can result in missed payments being recorded on your bank statements, which for many lenders is reason enough to decline an application.
2. Accumulating debt ahead of application
In the six months (or more) before applying for a mortgage, it’s a good idea not to create new debt. Unfortunately, many people fall into this trap without realising the impact it may have on their chances of approval.
To avoid this, regularly clear credit cards that you find yourself using consistently for day to day purchases instead of only repaying the minimum amounts. It’ll be worth it in the long run!
3. Taking out a new loan
Similar to debt accumulation, taking out a new loan in the lead up to application – regardless of the reason – can affect the outcome of how much a lender will approve you for. A lender will examine your net disposable income (NDI), which is the income you have left after all your regular outgoings are subtracted, including any loan repayments.
Generally speaking, your mortgage repayments should not exceed 35% of your NDI, so be sure to do your sums before applying for any additional loans ahead of the mortgage process.
4. Failing to show the ability to meet regular repayments
Whether it’s through rent instalments or a savings account, it’s integral to be able to showcase your repayment capabilities. Lenders want to see that you can afford to meet regular repayments, and ideally, these payments should be equal to or at least 10% higher than your future mortgage repayments.
The more you can set aside to cover these financial commitments, the higher your chances will be of getting approval.
5. Falling short on savings
Most people are aware of the 10% deposit rule for first-time buyers, and 20% for second-timers, but what about the other ‘hidden’ costs of obtaining a mortgage?
To give lenders peace of mind, you should have enough money saved to cover your approximate deposit, along with plenty of spare change to pay for solicitor’s fees, stamp duty, surveyor’s report, and all the other expenses involved.
6. Dipping into a savings fund
Until the dotted line is signed, it’s hugely important to leave your savings build-up and to resist dipping into them to cover unnecessary expenses that can wait until you have your keys.
7. Taking a new job before applying for a mortgage
It can be hard to turn down a great professional opportunity when it comes your way, but you should keep in mind that in order to apply for a mortgage, most banks will want you to have been in permanent employment for several months.
Also, if you’re self-employed, you will likely be asked to show at least two years’ worth of business accounts.
8. Delaying the search for mortgage protection
When applying for a mortgage, banks will require you to have proof of mortgage protection (also known as life insurance) before granting mortgage approval. Depending on your current health and medical history, you may need to get a medical or provide access to past records, which can all take time to process.
To avoid administrative delays that may stall momentum on the sale of your dream home, enquire about mortgage protection at the earliest possible point. Get in touch with Symmetry Financial Management to find out more about our mortgage protection policies.
9. Choosing a lender without doing your homework
With so many lenders scrambling for your attention, it’s important not to settle on any one option before doing your homework. Compare what each lender is offering in terms of interest rates and perks, such as cashback, to find the best quality deal to suit your budget and needs.
At Symmetry Financial Management, our team is here to lay out all the options available to you on the market to cut down hugely on your own research time. Just get in touch and we’ll take you through them, step by step.
How to avoid making these mistakes
Statistics reveal that over two-thirds of mortgage drawdowns in the first half of 2021 were made by first-time buyers. If you would like to find yourself among this successful cohort, take note of these tips that will help you to steer clear of the pitfalls associated with the mortgage application process.
- Get prepared by cleaning up your accounts and reducing outstanding debt (where possible) at least six months before applying.
- Plan in advance for each step in the process, by having all required documentation ready to go, hiring a solicitor, applying for mortgage protection as early as possible, and ensuring you have sufficient funds to cover all costs.
- Review your spending habits in the six to 12 months prior to application, making sure that no red flags (such as betting websites) show up on your accounts.
- Check your accounts frequently to ensure you always have sufficient funds to cover direct debit pay-outs, avoiding the danger of any missed payments.
- Consult a financial advisor to help keep you on track and steer you in the right direction during one of the most important phases of your life.
The benefits of working with a financial advisor
Enlisting the services of a reputable and impartial financial advisor will take the stress out of the mortgage process in several ways.
Firstly, with their advice and guidance, you will avoid falling into the trap of making the mistakes listed above. Secondly, their knowledge of the market will allow them to find the best deal suited to your individual circumstances. They will also carry out much of the work on your behalf, meaning you can focus on searching for your dream home.
At Symmetry Financial Management, we work with first-time buyers, switchers, home-movers, and investors to help you get the best rate on your mortgage, always. Our team of experienced mortgage advisors are on hand to explain all of the choices available to you in simple, concise language, allowing you to make a fully informed decision.
Get in touch with us today to organise a free consultation and we’ll talk you through the whole process.