What lenders look for when you apply for a mortgage

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Few areas of the process of buying your first property are quite as nerve-wracking as sorting out the mortgage. It's the biggest loan most of us will ever take out, and it isn't always that clear how a lender will judge your application.

So how do lenders work out who they are willing to lend to? And what can you do to improve your chances?

What's your income?

There was a time when lenders were mainly interested in your salary. So long as you seemed like a decent bet, they would then offer you a mortgage of around three or four times your annual salary.

Your income is still the biggest indicator that you're able to afford a mortgage. However, after the financial crisis the regulators forced lenders to be much more thorough in calculating how much a borrower can actually afford to borrow.

Can you afford the any increases in interest?

When a mortgage lender looks at whether you can afford a mortgage, they will also look to see if youre able to make repayments at the moment if interest rates go up in the future. Mortgage rates are pretty low in the market at the moment, which tells us that increases are inevitable at some point throughout the lifetime of your mortgage.

As a result, lenders will not just look at whether you can afford the repayments at the current interest rates but also if they go up by a couple of percentage points.

What are your spending habits like?

Some lenders might ask to see three months of bank statements so they can see how you handle your money. Just because you are earning enough money to comfortably meet those monthly repayments, can you really afford to do so with your current financial habits?

If your bank statements show that you regularly dip into your overdraft or have to turn to emergency borrowing, like payday loans, in order to tide you over then that won't help your case either.

Put yourself in their shoes; what sort of spending would make you as a lender more reserved about approving a loan? If they can see that you regularly spend large amounts on extravagant purchases, or are making plenty of payments to an online bookie, then they might be a little wary.

In contrast, if they can see that you manage your finances in a frugal and sensible way, then that can only help your case.

Do you pay your bills on time?

Lenders like to see a history of prompt payments. When they check your credit history they will be particularly keen to find out if there are any late payment black marks on there.

Remember, those late payments stay on your credit file for a whole six years, and could be the difference between getting approved and being rejected for credit. Make sure you have direct debits set up to cover all of your bills on time.

Are you on the electoral roll?

I know what you're thinking; surely a lender only cares about whether I can make my repayments every month, not whether I'm registered to vote?

However, being registered to vote helps a lender verify that you are who you say you are. So if you aren't on the roll already, get added as soon as you can.