But there are things you can do to bring you closer to owning your own home.
Here are 6 steps that could help boost your prospects of getting a mortgage.
Some lenders offer 95% mortgages for first-time buyers – this means you only have to pay a 5% deposit. For example, if the property price is £200,000, you’ll need a £10,000 deposit to borrow £190,000. If you’re able to save up for a larger deposit, it could improve your prospects of getting a mortgage.
A bigger deposit could mean:
a lower loan to value (LTV) ratio – the amount you borrow as a proportion of the overall purchase price – as you’ll need to borrow less
access to lower interest rates and, therefore, lower monthly repayments
Some of the government’s affordable housing schemes include:
If you’re looking to buy a new-build property, you may be able to get a low-interest government loan to add to your own deposit. Please note HSBC does not participate in this scheme.
This scheme helps you buy a share of your home (25%-75% of the home’s value) and pay rent on the rest. You can then buy the remaining portion of your property when you can afford to. Please note HSBC can only participate in this scheme if you have the ability to gain 100% ownership of the property.
If you’re a council or housing association tenant, this scheme can help you buy the property you currently rent, at a discount.
If you’re a regular member of the armed forces, you may be able to borrow up to 50% of your salary interest free, to put towards a house deposit.
Visit GOV.UK for more information on affordable home ownership schemes.
Lenders look at your credit score to help decide whether to accept your mortgage application. It can show them how you manage debt and credit commitments. A good credit score can improve your prospects of getting a mortgage.
Before applying, it’s recommended that you check your credit report to correct any mistakes.
There are also ways to improve your credit score. For example, you can join the electoral register – known as the electoral roll. This lists everyone who is registered to vote in the UK. Banks and building societies use this information to check that you are who you say you are. If your details are incorrect, or you fail to register, this can affect your ability to get lending.
It’s important to get on top of your finances before you apply for a mortgage. If you’re struggling financially or potentially over-extending yourself, your application may not be approved.
Missed and late payments can negatively affect your credit score. You can also be charged late-payment fees. Set up a Direct Debit on all your accounts to make sure every bill is paid on time and help you manage your money. These can include:
credit card and loan repayments
mobile phone bills
Explore: How to manage bills
Lenders want to be confident you can afford the repayments on your mortgage. If you have existing debt that also needs to be paid, they’ll take this into account when reviewing your application. Before you borrow more money, it’s a good idea to reduce your existing debt as much as possible. Creating a budget can help you understand where you could cut back to free up money each month.
You can then make a plan to pay off debt. For example, you could start by:
paying off the most expensive debt first, to reduce the amount of interest you have to pay; or
paying off the smallest debt first, to reduce the number of debts you have
Remember, you’ll still have to meet the minimum repayments on all debts.
Explore: How to repay debts faster
Being accurate and organised can help speed up the mortgage application process, increase your chances of getting accepted, and avoid any surprises.
Before you apply for a mortgage, you may want to:
make sure your details are correct and up-to-date, especially on your credit report
remove yourself from joint accounts that you share with flatmates or an ex-partner, for example, as their credit history can impact yours
check and collect what documents you may need, such as a months’ worth of payslips, P60 or an employment contract, or 2 years’ worth of Tax Calculations, Tax Year Overviews or financial accounts if self-employed
make sure the information on your application matches the documents you provide
Keep in mind – it’s important that you apply for a mortgage you can afford, even if your circumstances were to change.
Think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your mortgage.