How do mortgage lenders assess mortgage applications?

Mortgages are issued on the basis of three important factors. Understanding how lenders assess mortgage applicants can make the difference and help you improve your own score which may open up better mortgage deals. The factors are:

Deposit

Now that the financial markets have returned to sensible lending there are no longer 100% mortgages and 125% mortgages available therefore everyone needs to able to put up a deposit should they want to get a mortgage. The deposit required for mortgages ranges from 10% to 40% with 10% deposit mortgages being very rare. The best mortgage deals are available to those who are able to stump up large deposits since the bank is lending you less therefore their risk is less.

Affordability

Affordability is a much larger factor than in recent years when some banks would lend an individual up to five times their salary which we can see as very risky lending. The more cautious banks will on average offer you around three times your salary. Many lenders now score you on your affordability so will pay more attention to other debt, payment amounts due and interest on those payments as well as other financial commitments such as the cost of children which can be a big drain on funds. However lenders that do use affordability scoring will take into account other forms of income when accessing your application.

Credit worthiness

The final factor is an applicant’s willingness to pay that is how they have performed in the past. Again lenders are much stricter nowadays and were an applicant could get away with being late with a payment or possibly two in the past it wouldn’t happen now and most likely would cause a mortgage application to be declined. There are people with money problems however there are others who don’t have financial problems yet still miss payments and this can be attributed down to simply forgetting. Avoid the mark on your credit record that can result in huge consequences. Always go with the direct debit payment option were possible.

The final point to make about your credit rating is for those who don’t currently have a credit card or have used credit recently. If you have no history lenders will often decline an application because they can’t assess your past as there is no history of one. It is often wise to apply for a credit card as soon as possible and not too close to making a mortgage application. This will give you that record that can make the difference from getting a good m mortgage rate and a poor mortgage or even from being rejected all together for  mortgages.