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Sam covers personal finance topics, from the best savings rates to the reasons mortgage lenders say no. He enjoys crunching the numbers to help consumers get ahead.
A mortgage application is one of the biggest financial hurdles you'll face when buying a home. Yet simple mistakes, from errors on your credit report to missing paperwork, can delay your application or even lead to it being rejected.
To help you avoid common pitfalls, we spoke to lenders, mortgage brokers and industry experts to uncover seven common mortgage application mistakes and what you can do to avoid them.
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When you apply for a mortgage, the provider will conduct affordability checks to determine whether to approve the loan and the amount it is willing to lend.
Part of these checks will include searching your credit report. A key mistake is not creating a good financial picture with your credit report.
Francis York of Yorkshire Building Society recommends you check your file early and read it critically to see whether you need to make any behavioural changes before applying. York says borrowers may want to consult a broker who can help check their credit file, recommend any lifestyle adjustments and 'ultimately, make sure they’re approaching the right lender and putting their best application forward'.
Terry Higgins of The New Homes Group says you should also check your credit scores for errors, as: 'Even small inaccuracies, such as incorrect account balances or missed payments, can lower your credit score and affect your eligibility and decrease the amount that you can borrow.'
Of course, applicants shouldn't take on too much credit before a mortgage application. Jonathan Stinton of Coventry Building Society explains: 'Things like a new car loan will likely have more of an effect than a buy-now-pay-later loan for smaller items. But the smaller things can add up and may tip the balance between being able to afford a loan for a dream home or not.'
Some buyers assume they won't qualify for a mortgage or won't be able to borrow enough to buy the home they want. However, lenders have become more flexible in recent years.
In the past year, the Financial Conduct Authority has relaxed its rules, enabling providers to increase the amount they can lend. For example, some lenders now will offer loans six times income. Leeds Building Society will offer first-time buyers with a minimum household income of £30,000 up to 5.5 times their earnings for some mortgage products.
However, some buyers aren't aware of these changes, according to Matt Bartle of Leeds Building Society. Bartle's message is: 'Don’t rule yourself out. Explore the tools and support available, as homeownership may be within reach.'
Lenders' affordability criteria can vary, so a broker may be able to help identify suitable options if you've been declined elsewhere.
More than half of first-time buyers in the UK receive assistance from the Bank of Mum and Dad through a gift or loan, according to Savills' research carried out last year.
Higgins warns that gifted deposits need to be properly documented to avoid raising red flags during the mortgage application process. He explains: 'Lenders need to ensure that the funds are legitimate and not loans in disguise, which could affect affordability calculations. Without clear evidence of the source and nature of the gift, applications can face delays, additional scrutiny, or even rejection.'
David Hollingworth of L&C says it should be relatively simple to provide confirmation that it's a gift, not a loan: 'But make sure that parents are happy to provide written confirmation.'
Inaccurate or missing documents can slow the application process or even result in a denial. NatWest advises taking time to review your finances carefully and double-check documents before applying to help keep the application process on track.
Nicholas Mendes of the mortgage broker John Charcol points out that it's particularly important to have documents ready when an application needs to be submitted in a period of volatile mortgage rates.
He said: 'When lenders are repricing quickly, timing can make a real difference. If payslips, bank statements, accounts, ID, or deposit evidence are missing, it can delay submission and mean the borrower misses the rate they were hoping to secure.'
If you're self-employed, it's likely you will need to do additional planning and produce extra documentation when applying for a mortgage.
If you fail to prepare this before your application, it could delay it or mean you qualify for a smaller loan. For example, NatWest requires self-employed applicants to provide two years of income evidence.
If you have an accountant, Mendes advises self-employed applicants to speak to them about their plans to buy or remortgage.
He says: 'Accountants often look to make their clients as tax efficient as possible. The issue is that this can sometimes reduce the income figure a lender uses for affordability. We often see borrowers who feel they earn enough in real terms, but the way the income has been structured means they cannot borrow as much as they expected.'
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Join Which? MoneyWhen you're setting a budget and putting forward a mortgage application, it's important to factor in all the costs associated with moving. If costs are overlooked, money set aside for a deposit may be eaten up by other expenses.
Jonathan Stinton of Coventry Building Society said: 'The upfront costs of surveys, conveyancing and stamp duty, along with hiring a removals firm, buying new furniture or making urgent repairs, could blindside a borrower just when they think they’ve got enough in the bank to make that move.'
Mendes also stresses that buyers need to ensure they have money set aside in case a chain breaks, a completion date moves or extra legal work is required.
Research from Reallymoving in November last year found that the typical cost of moving now comes to almost £18,000. The average cost of buying your first home, excluding the deposit, comes to £2,315.
Regular gambling transactions on bank statements can result in lenders denying applications. Hollingworth explains that making the odd bet won't affect a mortgage application, but frequent bets will be factored into affordability assessments and could result in an application being denied, particularly if it's close.
Infrequent use of buy now pay later isn’t likely to have a big impact on an application, according to Hollingworth. But, as with gambling, if a lender sees a pattern of regular use of buy now pay later, 'It may be fed into the affordability calculation or lead to delays through further questions,' says Hollingworth.
