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What are Mortgage Lenders? And How can you get the Loan you want?

Getting a mortgage for first-time buyers is the ultimate Ying and Yang of excitement and anxiety firmly rooted in the buying process. But, how do mortgage lenders make decisions on whether someone can successfully gain a mortgage, so you can stay one step ahead in the buying process. 

Getting that first mortgage is one of life’s big landmarks. And while it may seem like you’re making real strides forward in doing so, it can be difficult to shake the trepidation that comes as part of the furniture. And why should it be? Decisions like this can be complex and tricky to wrap your head around for vast amounts of people, so why should you feel the need to feel any different? What this basically translates into is: don’t worry. Relax! You’re all in the same boat. 

So, sit back, put up your feet and station your laptop firmly on your lap. This article’s going to show you what factors mortgage lenders consider when deciding whether someone can get a mortgage. Let’s get started…

What is a lender and what do they look for?

Let’s start with the mortgaging ABC. Mortgage lenders can essentially be split into two different groups which largely takes the form of Banks and Building Societies. While there is some distinction between the two as establishments, there is not a fixed rule as to which offer the better rates and it will largely depend on the financial circumstances that you find yourself in. 

Lenders will mainly base their decision on whether to give someone a mortgage loan based on the credit score of the borrower. This will lead borrowers to complete an application form which will give the mortgage lender details of your income, expenditure, employment type etc. An application will need to be accompanied by supporting documentation, such as payslips, to evidence that the information keyed on the application is true and correct. Once an application has been submitted, the lender will also carry out a credit check to ensure you fit the criteria for the product you are applying for.

Are you a financial risk?

This is the main one. And who can blame them? When mortgage lenders are making their decisions on how much to lend and who to lend it to, they need to know whether you as the borrower are going to be a financial risk.

‘Financial risk?’ We hear you ask. How ambiguous of you! And you’d be right to question this, the parameters of what constitutes as a financial risk are often broad. What this means in the context of mortgages is that when you receive a loan do you have the capability to this back. Simple as it sounds? Yes and no. This means that lenders are going to look out for a few things as indicators of this. Here are a few:

Credit scores:

Contrary to popular belief, credit scores and scoring models aren’t just something that was dreamt up by banks to give you sleepless and were instead designed to tell mortgage lenders and creditors about the credit history and money habits of the borrower. This will then help the lender to ascertain whether you’re likely to be a good contender for a loan, before going on to use this information to ascertain what interest rate you’ll pay. However, it can be difficult to pinpoint what scoring model, system or algorithm different lenders are using to decipher, as it will vary with each one. 

In short, there is no universal scoring model that is consistently used by every mortgage lender and even your actual score may vary between different lenders, dependent on which credit reporting agencies they are using. Although this makes comparison difficult, do not read too much into your varying scores from different mortgage lenders and speak to them so you can see how the allocated score that YOU have been given by THAT lender works in THEIR business. 

What’s the best way to keep up your credit score and show that you’re not a financial risk?

Although the scoring models may be different from lender to lender, there are some universal truths that will contribute to you having a better credit score and ability to get the loan you want. 

Make sure your payments are on time: 

This might seem like a simple and obvious and although I’m sure many of you reading this are about to yawn, sign and then look at the next one PLEASE take it on board. Paying your bills on time demonstrates to mortgage lenders that you’re reliable and will demonstrate the same ethos to them. 

The track record of your open accounts and your credit utilisation:

Though this may be one that’s out of your control, if you can have it at your disposal it can be of great help. The longer your current account has been open will demonstrate that you have a proven track record of successfully managing your finances. Regarding credit utilisation, this is basically the total amount owed and then divided by the total available credit.

While this sounds simple, the less you have the best. You should be aiming for a credit utilisation score which is lower than 30%. Even if you have a credit card which you have not reached the limit of, meeting just your minimum payments each month can have a detrimental effect on your credit score as it doesn’t demonstrate you paying off the debt owed.

Tips from us:

If you’re still worried about your credit history and whether you’ll be eligible for a mortgage, then stay calm. You can arrange for a quick conversation with one of our mortgage experts. They’ll help answers any questions that you might have regarding your eligibility and any application or sign-up procedure. Then you edge that little bit closer to getting the right loan for you without any credit checks. Good luck!


Laura Waller

Laura Waller has been working in the mortgages industry since 2013, joining an independent brokerage in Essex. Laura has CeMAP 2 & 3 – Certificates in Mortgages Advice and Practice. Since then Laura oversees marketing for Mortgages Online, using her experience and expertise to write articles and blogs about mortgages and related topics.

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