Securing the best mortgage rate can be difficult. It is a complicated process, which varies from lender to lender. The key to ensuring that your mortgage is approved is knowing what a lender is looking for in a borrower. Once you know this, you can work on those areas that need improvements and highlight your strengths to a potential lender. So what factors determine whether or not you can secure a mortgage?
Job History
This is a major factor that is often overlooked. It is not enough to show that you have a stable income right now. Banks will want to look at your employment history as well. If you’ve had a secure job for many years, with a steadily increasing salary, then lenders will be confident you will be able to make repayments long into the future. If, however, you have been fired several times, they will view you as a higher risk.
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Credit Score
AAA Credit Guide ( https://www.crediful.com/best-mortgage-lenders/ ) says that even a small change in interest rate can equate to thousands of pounds of extra debt. This is why your credit rating is so important. For traditional high street banks, they want to see a high credit rating to lend with the lowest risk possible.
Size of Deposit
Even if you have a low credit rating and chequered employment history, you can secure a mortgage by offering a large down payment. This can be as low as 5%, but this will make your lender less than confident. By increasing the size of your deposit, you also reduce the total payment required, meaning you are more likely to repay the loan fully and, therefore, more likely to secure one.
Outstanding Debt
Before you consider taking out a mortgage, see if you can pay off your other loans. If you already have other debts, lenders will be concerned that you can’t afford to take on another one. If you are paying off credit card debt, college loans, and making monthly payments for your vehicle, adding a mortgage on top could overwhelm you. Try consolidating these other debts into one monthly payment to reduce costs and convince a lender you don’t have so much outstanding debt.
These are just some of the many factors lenders look for in a borrower. Before you attempt to purchase a house, your other finances should be in order and your credit rating high. Put down the largest deposit you can to gain the confidence of your lender.
