Am I likely to be approved by a mortgage lender?

Applying for a mortgage can be nerve-racking as you try to establish what a lender is looking for and whether you are likely to meet the eligibility criteria. Understanding what factors will help you succeed in being approved for a mortgage can be hugely beneficial and will be crucial for anyone taking steps towards buying a property using a mortgage loan.

What are mortgage lenders looking for?

Mortgage lenders usually look for borrowers who can prove that they can afford to repay a mortgage loan and maintain payments over the period of time it will take to do so.

Can you afford the mortgage?

Lenders have been tightening their assessment of affordability since the financial crash of 2008 in a bid to ensure that debt is issued to borrowers more responsibly. In the past, lenders typically multiplied your income by up to six or seven times in order to work out the maximum amount you could borrow. Now, the income multiple that you can borrow is lower and lenders are carrying out more sophisticated analysis of how much you can reasonably pay, not only now, but if interest rates rise significantly in the future.

What is affordability?

Affordability is a calculation of what the lender thinks is the maximum amount you can afford to repay, factoring in your income and any other financial commitments. Since the rules tightened in 2014, lenders are obligated to determine affordability at the introductory interest rate, at their standard variable rate and on the level of the monthly repayment if the Bank of England base rate rose to 6-7%. After interest rates rose in 2022 and have since begun to fall, lenders have started to loosen the stress-testing element of the affordability rules applied to mortgage applications.

How is affordability calculated?

Lenders tend to cap the maximum multiple of income to 4.5 times earnings for both individual and joint mortgage applications, although some will go as high as 5 times earnings, and 6 times earnings is possible for some scenarios, too. While lenders have always required details of major financial commitments - such as personal loans, car finance and utility payments - they are now more likely to take into consideration outgoings such as gym memberships, insurance policies, school fees and the money you spend on eating out and entertainment.

In essence, mortgage lenders want to stress test the likely affordability of the loan based on your current circumstances and what would happen if those circumstances changed. If you are applying for a relatively large mortgage that will stretch the 4.5 times income multiple, it may be a good idea to shave off any non-essential spending beforehand. As the lender will almost certainly ask for bank statements for the previous three to six months, it is wise to be sensible with your spending during this period.

Affordability can also be proven through a track record of paying rent, as Skipton Building Society has made its Track Record Mortgage available to those who have kept up rent payments for at least 12 months. The rent payments must be at least as much as the prospective mortgage payment and you must also be able to factor in regular bills. There are criteria that you have to meet in order to qualify for this type of mortgage so it is useful to discuss the option and compare it with other mortgages available to you with a mortgage professional before you decide.

How much will I be able to borrow?

To get a rough idea of how much you'll be able to borrow, you can use a '4.49 times your income' calculation as a minimum but there will be other factors that will determine the exact amount that you can borrow. Mortgage applicants who meet specific criteria, including if they are in certain occupations, earn over a certain amount of salary, have a good level of deposit, or are first-time buyers, may qualify for increased income multiples so that they can borrow a larger mortgage loan. We list the highest income multiples offered by lenders and explain more in our article, "How much mortgage can I borrow on my mortgage?".

Does employment status impact your mortgage application?

When assessing applications, lenders naturally favour those in long-term, full-time work with a steady income. People within certain professions may also be favoured by lenders - solicitors, accountants, doctors, nurses and other occupations that are deemed to be secure professions with increasing salaries may qualify for increased borrowing. Indeed, since the credit crisis, when self-certification mortgage applications were pulled, it has been more difficult for self-employed people to access mortgage products, with self-employed applicants required to provide more evidence of their earnings in the form of business accounts and tax returns. For more information, read our article "How to get a mortgage if you are self-employed".

How your credit score affects your mortgage application

Your credit score has always played a big part in your mortgage application, with the lender running searches on your file to assess your creditworthiness. If you know you have a poor credit rating, perhaps with missed payments on other loans or a CCJ in the past six years, you will be limited to a handful of lenders who will consider lending to you. In this situation, it is worth considering using an experienced mortgage broker with an in-depth understanding of the criteria each lender has to help you find the right deal for you.

If you are unsure what your credit score is, you can request your credit report from credit agencies. Our article "How to check your credit score for free" provides information about how to do this. To find out how to improve your rating and make yourself more attractive to lenders, look at our article "How to improve your credit score quickly".

 

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