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Top Mistakes to Avoid When Applying for a Mortgage in the UK

scrabble letters spelling out mortgage

Applying for a mortgage can be a daunting task.

There are a lot of things to think about, and the last thing you want to do is make a mistake that could end up costing you your acceptance or even your access to the best deals.

With that in mind, when you know the mistakes are possible, you can better avoid them, making the process less stressful and increasing your chances of securing the best rates.

In this comprehensive guide, we’ll discuss common errors and provide valuable tips to help you successfully navigate the UK mortgage market.

Mistake #1: Getting into Debt

One of the most common mistakes prospective homeowners make when applying for a mortgage in the UK is getting into debt or accumulating more before applying. 

It may sound like a simple point to consider, but you’ll be surprised by what counts as debt. Pay monthly phone contracts, hire purchases on cars, store credit, payment plans like “Buy now, pay in six months”, and overdrafts can all count as debt.

Mortgage lenders assess your financial stability and creditworthiness by evaluating your debt-to-income (DTI) ratio; the higher your debt, the higher your DTI will be, and a high DTI ratio may lead to rejection or less favourable mortgage terms.

Mistake #2: Falling behind on bills

If you’re late on any kind of payment or bill, contact your creditor as soon as possible to resolve the issue in the most beneficial way possible.

Failing to pay bills will leave a mark against your name. Mortgage lenders will see this as increasing the risk they’ll be taking by giving you credit, thus making it more difficult to secure a competitive mortgage deal. Each mortgage lender has its own criteria, some will not lend to anyone with a late or missed payment. So keeping up to date and on time with your payments ensures you’re in a better position to secure a mortgage.

If you’re still struggling financially, consider contacting organisations like the Consumer Credit Counselling Service (CCCS) for assistance to ensure everything runs as smoothly as possible.

That said, you should also consider this when it comes to purchases or payments of any kind.

Making late payments of any kind, especially those on an official payment plan, like hire purchase or a phone contract, can harm your credit score and may result in further consequences like account collections or even losing your home.

Don’t let your account go into collections. 

Mistake #3 – Maxing out credit cards

Maxing out your credit card is a bad idea as it leaves you with no wiggle room if you have unexpected expenses or emergencies. 

A mortgage lender wants to ensure that you are not living beyond your means, maxing out your credit card may be a cause for concern for a mortgage lender. Having a high credit card debt will also reduce how much you can borrow as a mortgage lender will factor in your credit card payments when assessing your affordability. 

Mistake #4 – Avoid changing jobs if possible

Avoid changing jobs too often, especially before applying for a mortgage. Lenders prefer at least two years of stable employment history, as it demonstrates financial stability and a consistent source of income.

Mistake #5 – Avoid making large purchases

Don’t spend money on things you don’t need, and don’t buy unnecessary things. It’s easy to get carried away with spending when a mortgage is being approved, but it’s important to keep your budget in mind when making these decisions. 

If a new car or furniture set is out of reach financially, wait until after the loan has been approved before making any major purchases.

Mistake #6: Having unexplained transactions on your bank statements

One of the most common mistakes people make is not checking their bank statements and credit reports. Banks have been known to make mistakes, so if you see any transactions on your statement that don’t belong there, contact your bank immediately.

If there are any errors on your credit report, it’s important to dispute them with the credit reporting agencies (Equifax, Experian and TransUnion).

If there are any inaccuracies in these reports due to identity theft or fraudulent activity – which can happen even if it isn’t directly related to mortgage applications – this could impact whether or not you are approved for a mortgage and the amount of money the lender is willing to lend you.

Mistake #7: Not checking your credit score

Regularly check your credit score using free online services like CreditKarma, ClearScore, or WalletHub.  For a more in-depth analysis, consider signing up to Checkmyfile for a 30-day free trial, using the following link . They offer a 30-day free trial, if you wish to avoid paying the monthly subscription of £14.99 per month please cancel before the trial period ends. Protection & Investment Ltd may receive a commission from checkmyfile when you register for the service, irrespective of whether you cancel during the free trial period or not. There are other credit reference agencies available, but we find checkmyfile to be the most useful as it incorporates the four main credit reference agencies that lenders use, rather than requiring you to register with all four individually.

Understanding your credit score not only shows where you are and what kind of credit and rates you’re entitled to but will also show you opportunities to improve your score, thus allowing you access to better deals.

Mistake #8: Applying for a mortgage without knowing you’ll be accepted

Get pre-approved before shopping for a home. This is called a decision in principle (DIP), often estate agents will want proof you’ve got this before showing you round properties. 

A decision in principle is an indication of how much a mortgage lender is willing to lend you – in other words, you know how much money will be available from lenders after they evaluate your financial situation. You can use this figure as leverage when negotiating with sellers or looking at different lenders’ rates and terms.

The last thing you want is to apply to a range of mortgage providers only to be rejected, as this will show up on your credit report, and future providers will then see you as a higher risk and will be less likely to give you a mortgage offer.

Mistake #9: Applying to Multiple Lenders Within a Short Time Frame

Hand in hand with the mistake immediately above, avoid applying to multiple lenders as it can decrease your chances of approval and negatively impact on your credit score. Instead, research and target lenders that are more likely to accept your application. Using a mortgage broker may help with this, they have an in-depth understanding of mortgage lenders and their criteria. This means that after they have assessed your situation they will be able to go directly to lenders who are more likely to accept your application.  

Mistake #10: Forgetting Essential Documents

Have the following documents readily available for your mortgage application:

  • Proof of income (three months payslips if you’re employed or tax returns for the past two years if self-employed)
  • Bank statements for the past three months
  • Proof of ID & address (make sure your driving licence is up to date with your current address) 

As long as you keep these things together in one place and don’t lose them, applying for a mortgage should be relatively smooth sailing! 

What have we learnt?

Avoiding these common mistakes when applying for a mortgage in the UK can help you secure the best deal possible. With careful planning and attention to detail, you can increase your chances of getting your mortgage application approved and move one step closer to owning your dream home.