Pointers For First Time Buyers To Help Ensure You Get A Mortgage Agreed
Although we are approaching 4 years since the beginning of the sub prime crisis which caused a domino effect and led to the worldwide banking crisis, credit crunch and global recession, we don't yet appear to be out of the woods and mortgage borrowing is still extremely difficult to obtain. This is especially the situation for first time buyers who have limited savings for deposit towards their 1st property and have not been financially trained to help them obtain a mortgage.
Lenders are heavily reliant on credit scoring methods to determine if an applicant is 'creditworthy' enough to enable them to get a homeowner's loan but what does credit scoring actually mean? Go online and you are being bombarded with banners and ads highlighting the ability to find out your credit score or evaluate your credit appraisal. Even turn on the TV and you have Experian advertising it's 'Credit Expert' service in prime time advertising breaks. Since providers have significantly tightened their lending criteria, credit reference agencies are doing a huge amount of business from people that are concerned about the entries on their credit record or using the service if they have already been refused for a loan, credit card or mortgage. This helps to educate people about credit scoring and enables the would be mortgagor who wants to keep an eye on their credit score until it seems plentifully high enough to apply for a mortgage or loan.
Borrowers still don't realise how much information is kept by credit reference agencies and shared with would be providers and this is getting more and more detailed as time passes. How many applicants think nothing of missing a few payments on a contract mobile phone or neglecting to pay a catalogue or credit card payment as there's only a small balance due? This has an extremely detrimental effect on a mortgage applicant's credit score and it will usually lead to the mortgage being declined by a high street bank. It is essential, regardless of how little is outstanding on a finance agreement that monthly payments are maintained on time each month without fail.
If you have an overdraft limit on your bank account, the majority of these now appear on your credit file and if you go beyond your overdraft then this will be reported to credit reference agencies and will appear as a '1' in your payment profile. This is interpreted by mortgage providers credit scoring models as if you have missed a payment on a lending agreement. This can even happen if you are as little as five pounds beyond your credit limit and there are some mortgage providers that will dismiss an application if they find a '1' on your credit file during the previous twelve months. Would be mortgage applicant's have to ensure that they conduct all of their finances in a satisfactory manner or suffer the consequences.
The percentage of available unsecured finance being used is an additional key factor utilised in lenders credit scoring techniques. For example, if an applicant has five hundred pound credit limits on a bank account and credit card but is up to the credit limit on each account then it seems that the borrower is overcommitted and the application is certain to be refused. Having the credit, using it and settling it in full every month will assist to make an excellent credit score and show the lender that the applicant is able to maintain their finances well. However, too many credit cards even if there is ample available credit can also have a damaging effect on credit rating when appraised against earned income so if cards are not being used then it can be worthwhile closing these accounts and they will not be taken into account in a credit score.
Simple things such as how long an applicant has been at their current home or how long in existing employment are other factors that will affect the score and the greater period of stability of address or employment will mean a better credit score.
Everything is not lost for first time buyers should they fail a high street lenders credit score as sometimes an increased down payment will reduce the score required or in the worst case scenario, should there be adverse credit recorded against the applicants credit report then there are specialist poor credit mortgage lenders that have lower credit rating score marks or some don't use credit scoring. Generally, as long as there are no CCJs or Defaults recorded within the last two years then a first time buyer may be able to find a mortgage with only 10% deposit.
Lenders are heavily reliant on credit scoring methods to determine if an applicant is 'creditworthy' enough to enable them to get a homeowner's loan but what does credit scoring actually mean? Go online and you are being bombarded with banners and ads highlighting the ability to find out your credit score or evaluate your credit appraisal. Even turn on the TV and you have Experian advertising it's 'Credit Expert' service in prime time advertising breaks. Since providers have significantly tightened their lending criteria, credit reference agencies are doing a huge amount of business from people that are concerned about the entries on their credit record or using the service if they have already been refused for a loan, credit card or mortgage. This helps to educate people about credit scoring and enables the would be mortgagor who wants to keep an eye on their credit score until it seems plentifully high enough to apply for a mortgage or loan.
Borrowers still don't realise how much information is kept by credit reference agencies and shared with would be providers and this is getting more and more detailed as time passes. How many applicants think nothing of missing a few payments on a contract mobile phone or neglecting to pay a catalogue or credit card payment as there's only a small balance due? This has an extremely detrimental effect on a mortgage applicant's credit score and it will usually lead to the mortgage being declined by a high street bank. It is essential, regardless of how little is outstanding on a finance agreement that monthly payments are maintained on time each month without fail.
If you have an overdraft limit on your bank account, the majority of these now appear on your credit file and if you go beyond your overdraft then this will be reported to credit reference agencies and will appear as a '1' in your payment profile. This is interpreted by mortgage providers credit scoring models as if you have missed a payment on a lending agreement. This can even happen if you are as little as five pounds beyond your credit limit and there are some mortgage providers that will dismiss an application if they find a '1' on your credit file during the previous twelve months. Would be mortgage applicant's have to ensure that they conduct all of their finances in a satisfactory manner or suffer the consequences.
The percentage of available unsecured finance being used is an additional key factor utilised in lenders credit scoring techniques. For example, if an applicant has five hundred pound credit limits on a bank account and credit card but is up to the credit limit on each account then it seems that the borrower is overcommitted and the application is certain to be refused. Having the credit, using it and settling it in full every month will assist to make an excellent credit score and show the lender that the applicant is able to maintain their finances well. However, too many credit cards even if there is ample available credit can also have a damaging effect on credit rating when appraised against earned income so if cards are not being used then it can be worthwhile closing these accounts and they will not be taken into account in a credit score.
Simple things such as how long an applicant has been at their current home or how long in existing employment are other factors that will affect the score and the greater period of stability of address or employment will mean a better credit score.
Everything is not lost for first time buyers should they fail a high street lenders credit score as sometimes an increased down payment will reduce the score required or in the worst case scenario, should there be adverse credit recorded against the applicants credit report then there are specialist poor credit mortgage lenders that have lower credit rating score marks or some don't use credit scoring. Generally, as long as there are no CCJs or Defaults recorded within the last two years then a first time buyer may be able to find a mortgage with only 10% deposit.
