Aspiring homebuyers can check their likelihood of getting approved for a mortgage without hurting their credit scores with new tools launched by Experian and Compare the Market.
Launching new initiatives within weeks of each other, the credit reference agency and comparison site allows people to “soft search” to find out where they stand before applying for a mortgage or house hunting.
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Which? explains how the new mortgage eligibility tools work, why they are important and what you can do to improve your mortgage chances.
How does the Experian mortgage eligibility tool work?
Experian’s mortgage eligibility checker takes the information you enter about your household income, address history, and financial obligations and compares it with the lender’s criteria and credit reference information held about you.
The tool can check your mortgage eligibility from seven lenders, including Aldermore, Barclays, The Co-operative Bank, Coventry Building Society, The Family Building Society, Leeds Building Society and West Bromwich Building Society.
It shows the mortgages where you are most likely to be accepted, as well as deals for which it cannot provide this information. Conveniently, it also tells you whether a lender could not lend you the requested amount.
The service lists the products available from each lender to help you compare. But keep in mind that the eligibility rating is meant to show your chance of being accepted by the lender, rather than for the specific product.
The Experian tool lets you search for fixed, variable, and tracker rates, but you can’t compare interest-only, buy-to-let, or lifetime mortgages — or mortgages that target government schemes like Help to Buy.
Your check will be recorded as a “soft search” on your credit report, but only you will see it instead of lenders. The check won’t affect your credit score and you can get a good idea of where you stand and what you need to do to improve your mortgage chances.
How does the market eligibility tool work?
You must enter information such as your household income, address history, and financial obligations. Compare the Market will match this data with the affordability and eligibility criteria of lenders in its panel.
The tool can check your eligibility with eight lenders, including The Family Building Society, Leeds Building Society, Platform, Skipton Building Society, Accord Mortgages, Coventry Building Society, West Bromwich Building Society and Yorkshire Building Society.
Rather than providing a rating and list of products like Experian, Compare the Market summarizes the lenders you may be able to borrow from and the range you can borrow.
Again, this will be just a ‘soft search’ so lenders won’t see it in your credit file and it won’t affect your credit score.
What should you pay attention to?
Both eligibility tools can be used by first time buyers, movers or people looking to get a new mortgage for a single or joint application, but they are not currently set up to help people looking for a buy-to-let -agreement.
The Experian and Compare the Market eligibility guidelines are only available to a selection of lenders, so there may be other providers in the market that are likely to accept your application.
Keep in mind that the tools don’t look at whether the mortgage is right for you and your financial needs. So while the eligibility check is helpful, it should be just one of the steps in your mortgage deal research.
What’s the point of these tools?
Research from Compare the Market suggests that many are too pessimistic about their mortgage loans, which can deter people from pursuing their dream of owning a home.
It found that almost a third (30%) of British adults do not think they are eligible to borrow money through a mortgage.
When asked to predict how much money they could borrow through a mortgage, more than half (58%) were not confident in providing an answer. Those who did were not optimistic: 16% thought they could borrow no more than £50,000.
With average home prices estimated at £225,621, this suggests a real lack of confidence about buying a home. Only 12% in the survey said they could take out a mortgage large enough to cover a home at the average national price.
However, Compare the Market found through the Mortgage Eligibility Checker that 45% of customers who conduct a search can borrow what they’ve asked for or even more, while 28% would get the green light for a lower loan amount.
Only 16% of customers were ineligible or unable to pay a mortgage and 6% did not have sufficient credit history to verify the tool. In addition, 20% of customers using the tool would not be able to afford or qualify for a new mortgage.
Do you need to use a tool to qualify for a mortgage?
Applying for a mortgage can be a daunting experience, even if you’ve done it before.
It’s hard to know if you qualify for a deal and if a lender is willing to lend you what you need to borrow.
A soft search is a great way to find out how much you can borrow and whether you’re likely to be accepted for a mortgage, but until now you should be treating the lenders individually.
So the new set of mortgage eligibility tools can save you time and give you a snapshot of where you stand with particular lenders.
It’s also a great way to avoid having to go through a hard credit check.
A hard credit search leaves a footprint on your credit report for other lenders to see. Having too much of it can lower your score and reduce your chances of getting credit in the future.
How to Improve Your Mortgage Odds?
If the mortgage eligibility tools show that you don’t stand a good chance of being accepted, this is a good opportunity to try and improve your financial situation. Here are some tips you can try:
Save a larger deposit – you need a down payment of at least 5% of a property’s value to get a mortgage. The more you save, the wider the range of products you can choose from. Lenders tend to like borrowers with a larger down payment because it means the deal is less risky for them.
Check your credit report for errors – you must pass a credit check when applying for a mortgage, so you must check your credit reports with Experian, TransUnion (formerly Callcredit) and Equifax contain no errors.
Increase your credit score – the higher your credit score, the better your chances of getting approved for a mortgage. Simple steps, such as registering on the electoral roll, can improve your assessment. Read more in our guide on how to improve your credit score.
Consider a real estate agent – a mortgage broker has expert knowledge of the mortgage market and can advise you on the best deal for your situation.
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