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    Six things millennials need to know before applying for a mortgage

    2 August 2019

    The mortgage market is more competitive than ever, with high street lenders like HSBC and Barclays offering headline grabbing low interest rates to help us millennials get onto the property ladder…and help them pick-up some new business too.

    And while it may sometimes feel like there’s not much difference between mortgage lenders, each has its own set of unique criteria, degrees of flexibility and varying customer service, which is why around three thirds of us choose to use a mortgage broker to help guide us through the mortgage labyrinth.

    Whether you choose to go it alone or work with a mortgage broker, here are six things you really should know before pressing send on your mortgage application.

    1. Mortgage lenders have a love-hate relationship with the gig economy

    The biggest challenge most mortgage lenders face is assessing affordability, i.e. how much you can afford to borrow. The arrival of the gig economy and zero-hour contracts has made this harder for mortgage lenders, and they all treat ‘non-standard’ incomes sources like overtime pay, commission and tax credits differently. They also have very different lending policies, so while some are happy to lend up to five and a half times your income, others will take a much more conservative approach.

    For example, recent mortgage broker research found that Nationwide Building Society was viewed as good for commission based occupations, while Accord and Santander were viewed as among the most generous mortgage lenders overall.

    2. Get on the ladder before you become a parent

    Each young child you have reduces the amount a mortgage lender may be willing to offer you, as you’ll need more of your income to pay for their expenses.

    3. Rent payments don’t always count

    Many of us assume that if we can afford our monthly rent, and a mortgage would cost less, then getting a mortgage will be easy. But proof you’re able to pay your rent on time doesn’t count for much at this point. FinTech firms like Bud are working hard to change this, but the mortgage industry still has a way to go before rent recognition goes mainstream.

    3. If you earn a freelance income, look for banks who recognise non-salaried earnings

    The biggest challenge most mortgage lenders face is assessing affordability, i.e. how much you can afford to borrow. The arrival of the gig economy and zero-hour contracts has made this harder for mortgage lenders, and they all treat ‘non-standard’ incomes sources like overtime pay, commission and tax credits differently. They also have very different lending policies, so while some are happy to lend up to five and a half times your income, others will take a much more conservative approach.

    4. Check your credit report and say no to hard searches

    When applying for a mortgage, credit scores really do matter, so sign-up for a free credit report with the likes of Clearscore to find out more about yours. If you see any inaccuracies it’s worth challenging them. Not paying bills on time, including mobile phone contracts, risks lowering your credit score, and you should really avoid seeking out any new loans or credit cards in the run up to your mortgage application, as this won’t be viewed positively by lenders.

    If your credit score isn’t great, try to find a mortgage lender that will only perform soft searches (rather than hard searches) to avoid lowering your score further.

    5. Use The Lifetime ISA to help you save

    Saving up for a deposit isn’t easy, but the government launched a new type of ISA in 2017 called the Lifetime ISA which will help you save for a deposit more quickly. While there’s a few key restrictions you should definitely be aware of, you can put in up to £4,000 each year, and the government will add a 25% bonus to your savings up to a maximum of £1,000 per year.

    6. Think about a lender’s service as well as the rate

    It can be all too tempting to jump into bed with the mortgage lender offering you the lowest interest rate. But the service levels offered by lenders also matter. In the words of one unhappy mortgage applicant, “I’ve wasted over 13 weeks waiting to get a mortgage offer, having spent time sending documents over and over again. Now I’ve just had my mortgage offer declined with no good reason. I may now lose our dream home due to having been strung along.”

    With the likes of Monzo and Starling taking the current account market by storm, it’s easy to assume that new names like Metro Bank will perform better than the likes of Halifax or NatWest. But when it comes to mortgages, satisfaction with the big high street banks and building societies is often a lot higher than the other lenders out there.

    Applying for a mortgage can be a long, winding and complicated road. And while it may not always feel like this, mortgage lenders really do want to get you from start to finish as quickly as possible.

    Michael Fotis is the Founder of Smart Money People, a customer review website about financial products and services.