Pointers For First Time Buyers To Help Make sure You Get A Mortgage Accepted

Even though we are approaching 4 years since the start of the sub prime crisis which started a domino effect and led to the global banking crisis, credit crunch and global recession, we don't yet seem to be out of the woods and mortgage funding is still immensely difficult to get hold of. This is especially the dilemma for first time buyers who hold limited savings for deposit towards their 1st purchase and have not been financially educated to help them obtain a mortgage.

Mortgage providers are heavily reliant on credit scoring methods to calculate whether an applicant is 'creditworthy' enough to allow them to obtain a homeowner's loan but what does credit scoring in fact mean? Go online and you are being bombarded with banners and adverts promoting the ability to find out your credit score or assess your credit assessment. Even turn on the TV and you have Experian promoting it's 'Credit Expert' service in prime time ad breaks. Since lenders have significantly tightened their borrowing criteria, credit reference agencies are doing a huge amount of business from applicants that are anxious about what is on their credit record or using the service if they have already been declined for a loan, credit card or mortgage. This helps to educate individuals about credit scoring and enables the would be mortgagor who wants to keep up to date with their credit score until it seems abundantly high enough to apply for a mortgage or loan.

Borrowers still don't realise how much data is held by credit reference agencies and shared with would be funders and this is getting more and more detailed as time goes by. How many individuals think nothing of missing a couple of payments on a contract mobile phone or neglecting to pay a catalogue or credit card payment as there's only a small balance remaining? This has an extremely detrimental effect on a mortgage applicant's credit score and it will more than likely lead to the mortgage being declined by a high street lender. It is essential, regardless of how little is remaining on a finance agreement that monthly payments are made on time each month without fail.

Supposing that you have an overdraft limit on your bank account, the majority of these now show on your credit file and if you go beyond your overdraft then this will be reported to credit reference agencies and will show as a '1' in your payment profile. This is interpreted by lenders credit scoring models as if you have missed an instalment on a lending agreement. This can even occur if you are as little as five pounds above your overdraft limit and there are some financial institutions that will deny an application if they find a '1' on your credit file within the preceding 12 months. Would be mortgage borrowers have to make certain that they conduct all of their finances in a satisfactory manner or suffer the consequences.

The percentage of available unsecured finance being used is another main factor utilised in mortgage providers credit scoring methods. For example, if an mortgagor 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 appears that the applicant is overcommitted and the application is likely to be refused. Having the credit, using it and repaying it in full every month will assist to build an excellent credit score and exhibit to the lender that the borrower is able to maintain their budget well. However, too many credit cards even if there is sufficient available credit can also have a detrimental effect on credit rating when evaluated against pay so if cards are not being used then it can be worthwhile closing these accounts and they will not be taken into consideration in a credit score.

Basic things such as how long a borrower has been at their current home or how long in existing employment are other factors that will affect the score and the longer period of stability of address or employment will lead to a better credit score.

Everything is not lost for first time buyers should they fail a high street lenders credit score as usually an increased deposit will reduce the score needed or in the worst case scenario, should there be adverse credit registered against the applicants credit record then there are specialist bad credit mortgage funders that have lower credit score score marks or some don't use credit scoring. Frequently, as long as there are no CCJs or Defaults registered during the previous 2 years then a first time buyer may be able to find a mortgage with only 10% down payment.


The author, Shaun Bielby is a specialist mortgage and protection advisor with Mosaic Mortgages who are mortgage brokers that specialise in helping first time buyers with a poor or adverse credit history to obtain the most appropriate bad credit mortgage for the borrower's circumstances.