How to increase the chances of having a mortgage application approved?

How Can One Increase the Chances of Having a Mortgage Application Approved?

The interest rates increased from 0.1% in 2020 to a staggering 1.25% at the beginning of June- the Bank of England introduced the move to tackle the inflation rate. The economic outlook shows no improvement as experts forecast inflation rates to reach double digits on the line to further energy price hikes.

However, citizens can improve their chances of securing a mortgage even in an unstable financial climate. If you have faced mortgage application rejection recently and wondering how you to avoid facing rejection again, the blog will help.

Why was my mortgage application rejected?

There are a few reasons behind mortgage application rejections:

a) Defaults or missed repayments

b) Not on the electoral roll

c) Failure to align with lender’s eligibility criteria

d) Too many high-interest loans in the profile

e) Multiple mortgage applications

f) Lived in the UK for less than 3 years

g) You are a self-employed or contract worker

Are there any mortgages for self-employed without accounts?

When a self-employed just starts a business, he does not have many accounts in the revenue book. Having a sufficient income bracket is a critical aspect of securing a mortgage. Many lenders provide a mortgage for self-employed without accounts.

However, these can be costly. While many lenders accept SA302 self-assessment submission for a mortgage application and file an agreement in Principle (AIP), it does not guarantee mortgage approval. This agreement last for 3 months. If the lenders, in any case, consider AIP, it would be based on anticipated earnings and net profitable/ salary and dividend; it is still accurate.

Mortgages are difficult to secure for self-employed individuals. The reason is- lenders find it challenging to find enough income proof and reliability to pay off repayments on the mortgage.

In this case, you may need an accountant who may help project the earnings for the future and help lenders decide right. The more you can provide on the income side, the easier it will be to qualify for the mortgage. With new startups and freelancers budding in the UK, there is an increased demand for self-employed mortgages.

How Much Could You Borrow with One Year of The Self-Employment Journey?

The amount you can borrow as a self-employed is similar to that of an employed person. You may borrow around 4-5x of your income.

If you reveal the invoices and the projected revenue you are still to recover from your clients, you may gain the lender’s trust and qualify for a higher mortgage amount. However, you must ensure a healthy credit score as well.

It will help you eliminate any chances of mortgage loan application rejection. Some lenders may draw upon your future projections and lend a sum accordingly. Thus, it is always better to consult an independent mortgage advisor in Edinburgh. It will help you gauge the potential risks associated and fetch the personalized mortgage from the best lender in the UK.

5 Ways to Improve Chances of Mortgage Approval

Getting a mortgage is a wholesome experience of exploring the best quotes, identifying the lender's requirement, and the affordability gave the income status.

Here is how you can improve your chances of boosting your mortgage loan application rate:

1. Save for a larger deposit

The higher the deposit on the mortgage application, the higher the chances of getting the loan approved. Credit score and income are essential parameters to secure a mortgage. If you struggle to maintain a good credit score and are self-employed, ensure a good upfront deposit.

It lowers the LTV (Loan-to-value) ratio. If you default on the mortgage payments, the lender may claim the mortgaged property. A lower LTV implies that they could recover the total debt by selling off the property.

2. Analyze the lender’s requirement

Before applying for a mortgage, it is essential to know the lender's lending point of view. Here are 3 criteria upon which the lender rests his approval.

a) Affordability

It is the measure of loan affordability to repay the debt. It looks at your income, outgoings, and repayment stability. If you are self-employed, ensure every invoice is in place.

b) Deposit

The higher the deposit, the lowers the risk on the mortgage. However, be conscious that the lender may ask for the source of deposit. If you borrowed it from someone in your family or friend, be upfront about it.

c) Credit History

Lenders check the credit profiles to ensure you do not have any high-interest debt lurking in your credit report. You may get the mortgage loan approval if you have a default-free credit history, no CCJ, or missed repayments.

Getting a tab over these fundamentals may help improve the mortgage approval chances. Keep the below documents handy as proof and loan process completion:

• Your ID proof and Address proof: Passport, ID card, utility bills

• Your income source proof: payslips, invoices, P60, self-employed tax returns

• Total expenses: information about credit cards, bank statements, and loans in the credit report

Check the lender's criteria to get a mortgage for the self-employed without accounts.

3. Register for the electoral roll

It could be challenging to qualify for a mortgage without your name on the electoral roll. It helps you pass through the initial borrower profile assessment. Having your name on the electoral roll dispenses reliability. If lenders know who they are lending to, the borrower can expect a quick mortgage loan application approval.

Lenders verify a borrower's identity by scanning the electoral roll for the location and address. Check your credit profile to see whether you have registered for the electoral roll.

Foreign Nationals cannot vote as UK citizens. Some lenders provide mortgage approval to non-residents. However, it could be a long process, thus not guaranteeing loan approval. If confused, check in with an independent mortgage advisor in Edinburgh to make the right move.

4. Avoid getting a new loan

Mortgages require patience and financial commitments. Avoid getting any new loan before applying for a mortgage. A lot of unsaved debt can hamper your application approval. If you have a bad credit profile, wait until the credit score improves. Avoid using your credit cards during this time.

5. Fix the mistakes on your credit report

It is good to check your credit report every once a month. Take a closure look to identify the mistakes that could affect your loan application negatively:

• Identify the unpaid debts

• Check the paid debts that still exist on the credit profile

• Are there any debts that you never took in your name?

• Information regarding the spouse that should not be there anymore

• Out-Dated information

• Are there any paid high-interest debts on your credit profile? Get it cleared.

• Incorrect notations for closed accounts

Checking debts on your credit profile frequently is a good idea if you are eying a mortgage. If you have a lot of errors on your credit profile, call the lender or credit agencies.

Conclusion

These are some ways that can help you secure a mortgage quickly. Research, and improvise your credit health and affordability. Analyze if you could delay the mortgage until credit improves. It is the most significant life decision; make the right move.

Description: You should be mindful of certain things to improve mortgage application approval chances. Self-employed can benefit from the guide.