If you are planning on buying your first home then you have no doubt been saving for a number of years to come up with the minimum 10% deposit required. This comes to around £16,000 on an average priced home in the UK.
There are a number of lenders who are offering 10% mortgages. In reality, however, coming up with a 10% deposit is not as easy as it sounds.
When you compare mortgages you will no doubt come across a number of attractive offers, but be careful with the small print and take care of pre-existing loans and other debts to help you qualify for the best option.
According to the experts, a vast majority of those who apply for mortgages with a 10% deposit are actually turned down. This is because no matter what the building societies and banks advertise, these types of loans are considered a high risk and the lending institutions want to limit their involvement in risky endeavors.
A lender may offer a 90% mortgage, but this does not mean he has to give this to you. There are few deals available when it comes to this borrowing level so the criteria can be especially tight. This is why it is so important to get your financial situation under control and take the time to compare mortgages.
Whether you are given the loan or not depends largely on your credit score. The big banks and lenders have access to your credit report from several of the UK’s credit reporting agencies. They also use their own system for giving you a score and this can be the main problem that first-time buyers face. Credit scoring varies between lenders and the applicant never gets to see this score, making the process less than transparent. The lender does not have to give an explanation for turning you down. It is simply enough that you did not meet the level of credit score required.
There are several measures that can be taken to maximize the chance of being accepted for a mortgage with only a small deposit. One of the first things you need to do is check your credit score. This can be done by contacting one of the credit reporting agencies such as Equifax or Experian. If there is something on the report that is not right you should contact them immediately so that the error can be corrected. This is the report that the mortgage lenders will see.
Another thing that can be done to increase your chances of getting a mortgage is to keep steady employment. Lenders like to see applicants who stay with their jobs for at least 18 months. This shows reliability and an ability to make mortgage payments.
Electoral roll registration is another thing that lenders like to see. It helps confirm your identity and history of addresses. Electoral roll inclusion also has the potential to improve your credit score.
Do not be tempted to get application-happy when you are shopping for a mortgage. If you are living in Australia you can check out Sydney Mortgages. Such Lenders can trace your application history and making too many applications does not look good to them. If you have been turned down by too many lenders, the next one is likely to be very hesitant to give you a loan. If you are having problems obtaining a loan there is the option of working with a mortgage broker or financial adviser who can help you compare mortgages and obtain mortgage success.