Are you mortgage-ready?

So, you want to buy a property and you need a mortgage.

You’ve got your deposit, and you’re ready to approach a lender… who doesn’t like what they’re seeing, and it’s left you stumped.

Here’s the thing: while saving for your deposit is a crucial first step, there's much more preparation work needed to make your mortgage application successful. Before you even apply, you need to make sure you're mortgage-ready.

The mortgage process actually is a box-ticking exercise with criteria that you have to meet, so this week, I’m sharing my top tips to help you get started.

Go back six months

Your bank statement might be looking great right now, but how is your recent financial history looking?

This is key for mortgage lenders: most of them will look at the last six months of your financial behaviour, so you have to start cleaning up your act at least half a year before applying.

This means making sure that you haven’t missed any bill payments – that’s your household bills as well as any credit card or loan repayments. Gambling transactions or payday loans are a massive red flag, so make sure they don’t appear anywhere. Similarly, using too much of your overdraft will raise a lot of questions, so try to reduce any reliance on it. They’ll be looking to make sure you’re maintaining a stable income so you can make your repayments, and if you can demonstrate that you’re building a pattern of regular saving, that’s even better.

Think of it this way - you’re asking someone to lend you a huge sum of money, so you have to prove to them that they can trust you with it.

Clean up your spending habits

I mean it when I say that mortgage lenders are going to be forensic when it comes to digging into your finances. They'll be looking at both your bank statements and your monthly commitments – as well as those household bills and credit card repayments and how well you can save, they’ll be examining your spending patterns on non-essentials too.

So, whilst you’re going through your bank statements, take the opportunity to look at your other spending. Cancel any unused subscriptions or memberships that you might have forgotten about, and cut back on any non-essentials – that’s takeaways, meals out and impulse buys.

If you have any regular expenses (eg your weekly food shopping), try and find cheaper alternatives.

Remember, it’s not just about how much you earn, lenders will be looking at your disposable income to determine how much you can borrow, so the smaller expenditure you’re showing, the better.

Take a good look at your credit profile

Your credit rating can make or break your mortgage application, and just before you talk to a lender shouldn’t be the first time you pay attention to it.

Get hold of your credit report and go through it with a fine-toothed comb. Look for any mistakes, and make sure they’re corrected ASAP if you do find any. Register on the electoral roll at your current address, and close down any credit accounts that you aren’t using.

Where possible, pay down existing debts, and avoid applying for any new credit accounts (including store cards and new mobile phone contracts) in those months before your mortgage application: they’re all logged on your credit report and can bring your score down.

Get your paperwork ready

Again, this comes down to demonstrating you’re a serious (and trustworthy) applicant, and having all your paperwork organised and ready makes the process smoother, rather than having to scrabble around for things at the last minute.

You’ll need to gather bank statements, payslips, information on how much tax you’ve paid, proof of address for the last three years, valid ID, proof that you have your deposit (and its source), as well as any relevant correspondence about any savings or investments you have. You’ll need to provide proof of any bonuses or additional income, give details of any existing loans or credit commitments, and give details of ALL your accounts – even that Revolut account you got and only use when you’re overseas!

Do your research

Thorough research into both properties and mortgages isn't just helpful—it's essential. It’ll allow you to make informed decisions and avoid costly surprises down the line.

Take some time to get really familiar with your target property market. Look at the current property values in your preferred areas and pay close attention to recent sale prices and how they compare to asking prices. This will help you set realistic expectations and also identify potential bargaining opportunities.

Don’t forget to factor in any additional costs that might impact your budget, such as stamp duty, leasehold fees or service charges. They can all add a substantial amount to your purchase price and affect your monthly outgoings. Being aware of these costs early helps prevent unwelcome surprises during the purchase process.

You should also know your way around the various mortgage options that are available. Fixed rate mortgages offer predictability and protection against interest rate rises, while variable rates might provide lower initial payments but carry more risk. Be aware that the size of your deposit will play a key role in determining your mortgage options: larger deposits generally unlock better interest rates. Take some time to stress test how different deposit sizes affect your monthly payments and overall interest costs. Again, don’t forget to fact in additional fees and charges that can significantly impact the total cost., such as arrangement fees, valuation fees, early repayment charges or exit fees.

Different lenders have varying lending criteria, and understanding these can save you time and disappointment. Some may be more accommodating if you’re self-employed or have a variable income, while others might offer better deals for certain professions.

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Whilst a mortgage application may feel like the final piece of the puzzle, you need to start thinking about well before you start approaching lenders. It needs careful preparation and attention to detail and the more organised you are, the smoother the process will be. Remember, lenders want to see that you're a responsible borrower and that you’ll be able to make repayments.

Taking these steps won't guarantee mortgage approval, but they'll certainly put you in the strongest possible position when you do apply.

If you didn’t hear it the first time round, go back and listen to episode 217 of the podcast, where I’m in conversation with Mags Barrett, the MD of Mortgage Navigators. We take a deep dive on the topic of getting mortgage ready and she shares some super useful tips!

Listen now