Improve Your Chances Of Being Approved

Applying for a mortgage is an exciting but daunting task that comes with a lot of research, paperwork and careful thought. As you hunt for appropriate deals and explore the different mortgages (including mortgages for teachers) available to you, you’ll also want to aim for your chances of getting approved to be as high as possible.

Many factors may affect your approval – some small, some much larger. Thankfully, our simple and effective advice will soon decrease your stress and clarify your confusion.

From credit scores to financial overextension, this article explores the most common approval-impacting factors.

Boost Your Credit Score

Your credit score significantly impacts your mortgage plans (more specifically, it affects the number of mortgages you can access and get approved for).

Usually calculated via a mass of data known as your ‘credit history’ by one of the UK’s three leading credit rating agencies (Experian, TransUnion and Equifax), your credit score tells mortgage lenders how much risk to attach to you as a borrower. Balancing factors like credit usage and history, payment history and credit mix, the generated ‘score’ helps them determine how likely you are to successfully make repayments on time over a long period of time.

Generally speaking, if you have a higher credit score, you present a lower level of risk to lenders, and you’re more likely to get a better mortgage – more favourable rates, more choice of term length and specific conditions, etc.

On the flip side, if you have a lower credit rating, you’ll find that your choice is increasingly limited as your score slips from ‘Exceptional’ to ‘Very Good’ to ‘Good’ to ‘Fair’ to ‘Poor’. To improve your credit score and resultantly enhance your chances of mortgage approval, you should:

• Confirm that you’re on the electoral roll (this is a straightforward score boost that’s sometimes overlooked!)
• Check that all the information on your credit file is accurate and not unfairly affecting you
• Clear your overdrafts and focus on paying off / consolidating debts
• Build your credit by taking out a credit card if you haven’t already
• Close unwanted or unused credit card accounts if you have multiple
• Make regular credit card payments on time, aiming to pay off your balance in full each month or at least pay as much as you can – don’t just pay the minimum
• Avoid moving home too often if possible (this can signify instability to lenders)

This article explains how to improve your credit rating in more detail.

Minimise Your DTI

Following on from the above, one of the best ways to improve your chances of getting approved for a mortgage is to lower your debt-to-income (DTI) ratio – the amount of your gross monthly income that gets put towards your rent/mortgage, your credit card payments and any other debts that you’re paying off.

Lenders look at your DTI ratio when measuring your ability to manage future mortgage payments, which will fluctuate (and often increase) with time. If you have a low DTI ratio, this is usually indicative of good financial balance in life.

Most lenders offering mortgages (including mortgages for teachers) are looking for a ratio of 36% or lower, with no more than 28% of that debt going toward rent/mortgage payments. If your ratio tops 36% and you want to lower it to open up your field of options, aim to either reduce your monthly recurring debts (perhaps redirecting some of the money you’re putting into savings to pay debts off more quickly?) or seek methods by which to increase your gross monthly income.

The most important thing you can do as you manage your DTI ratio? Pay careful attention to where your money is going each month. The more you know about your finances, the more room you’ll have to find areas for improvement.

Maximise and Organise

Many of the tips you’ll find online about increasing your chances of mortgage application success come down to proper planning. For example:

• Ensure your income is provable
• Ensure your documentation is in order and available to prevent delays
• Do your research to determine what might be a suitably priced home for your financial means and eligibility
• Consider your long-term plans and how you can maximise your deposit during the saving and buying phases

Your deposit is especially crucial to your approval. The bigger the deposit, the more mortgage choice you’ll have. Lenders reserve their best rates for hopeful buyers with good-sized deposits, and preferable loan-to-value (LTV) bands lead to lower monthly mortgage payments.

Most lenders require an LTV ratio of 95% or lower; the more you can reduce this ratio, the better off you’ll be. Rates tend to move in 5 to 10% point banks, with the best mortgages available under 80%. Balance your desired property price and size with the benefits you could reap by purchasing a cheaper property with a larger deposit.

How Hard Is Mortgage Approval for Self-Employed Professionals? 

If you’re self-employed, you might be curious about how your mortgage approval process will differ from that of a traditionally employed person. The answer is that there is a possibility it can be more challenging to get approved due to the criteria of most mainstream lenders – but it’s not impossible.

Unlike employed professionals, who only need to provide payslips for the last three to six months, self-employed professionals usually need to share the last two years of tax calculations and tax year overview documents at minimum. Even with this documentation, they will be approached more warily by some lenders as a result of their fluctuating/unpredictable income.

We recommend that self-employed people seek expert advice from a specialist broker or lender. By finding an advisor with experience in self-employed mortgages, you’ll up your chances of obtaining the best deals and find you can work by different, more suitable lending criteria.

When Should I Seek Expert Mortgage Approval Advice?

If need help finding mortgages (including mortgages for teachers) and you’re doubting the home purchasing process and feeling confused about the ins and outs of mortgage approval, don’t be afraid to seek professional help.

A mortgage broker can show you where to start, what you’re eligible for, and how much you can borrow. They’ll remove a lot of the stress, handle most of the paperwork for you, and help you access exclusive products and rates that aren’t available to the public.

Please don’t hesitate to contact a member of the team to find out more about the topics covered.

The content in this article was correct on 24 August 2023.

You should not rely on this article to make important financial decisions.

Teachers Financial Planning offers independent financial advice on savings, pensions, investments, protection and mortgages for teachers and non-teachers. 

Your home is at risk if you do not keep up the payments on your mortgage. 

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