Credit History Impacts First Time Buyers | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 11/06/2021

As house prices continue to reach new highs many first-time buyers focus on saving for a house deposit, but for some securing a mortgage offer can also be a challenge when looking to fulfil their dream of home ownership.

In fact, research carried out by Aldermore found that only one in five (19%) first-time buyers were able to secure a mortgage on the first attempt. In addition to this, two-fifths (38%) were rejected for a mortgage once and 43% of those surveyed said they were rejected for a mortgage multiple times.

Aldermore found that the most common reasons why first-time buyers were rejected for a mortgage was poor credit history (41%). The second most common reasons was not having a large enough deposit (39%).

Fortunately for first-time buyers, the last month has seen a significant rise in mortgage deals available. This means that those looking to secure a mortgage have more options available if their initial application is rejected, as well as having a greater choice in deals that may make it easier to find one that suits their financial circumstances.

How to increase your chances of getting a mortgage

Although having more deals to choose from can help first-time buyers to secure a mortgage offer, there are also a number of steps they can take to help improve their chances of their first application being accepted.

As the Aldermore research found that the most common reason a mortgage application was rejected was due to a poor credit history, first-time buyers should ensure that their credit score is as high as possible before making a mortgage application. It may be wise for first-time buyers to check their credit score, which can be done online for free here, before considering applying for a mortgage. If the credit score comes back medium or low, first-time buyers may want to work on improving their score before making a mortgage application. Our guide on how to improve credit scores provides useful tips on improving the score.

When making a mortgage application, the mortgage lender will likely request several months’ worth of bank statements. Lenders do this as they not only want to ensure that the borrower’s income can cover the mortgage repayments, but also want to ensure that the borrower is able to manage their finances and they will not be overstretched keeping up with the repayments. As a result, first-time buyers may want to be careful with their spending in the months leading up to their mortgage application and avoid making any big ticket purchases such as an expensive holiday until after a mortgage application has been accepted.

In addition to this, the lender will also likely take into account the borrower’s outstanding debts. Although having some debt will unlikely result in the application being declined, if the borrower has a high amount of debt that a significant part of their monthly income is spent on repaying, this will likely make the mortgage lender reject the application. First-time buyers with debts may, therefore, find it better to clear the majority of their outstanding debts before they try to secure a mortgage. Tips on becoming debt-free can be found reading our guide, 12 steps to clear your debt.

When ready to go ahead with trying to get a mortgage, first-time buyers may find that they are more successful going through a mortgage broker. A mortgage broker will be able to look at the borrower’s financial situation and suggest mortgage deals that suit their individual circumstances. As well as this, the mortgage broker will fill in and send the mortgage application on the borrower’s behalf, which not only takes away some of the stress of applying for a mortgage, but they will also know what information the lender will need to approve the mortgage application.

Ready to apply for a mortgage?

If you are ready to apply for a mortgage, using a mortgage broker, such as our preferred broker Mortgage Advice Bureau, will help to make the process easier as they will be able to talk you through the best deals available and take care of the mortgage application on your behalf.

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