How to be approved for a shared ownership mortgage

Shared ownership makes it easier for first-time buyers to take their first step onto the housing ladder. Here are some tips to ensure you're approved for a shared ownership mortgage.

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Shared ownership allows you to “part buy, part rent” a property. You’ll take out a mortgage on a specific percentage of the property and pay rent on the rest. It’s therefore a useful scheme to help first-time buyers with low deposits and low incomes onto the housing ladder.

However, it’s still recommended to do everything you can to boost your chances of being approved for a shared ownership mortgage.

By following the tips below, you can boost the odds of being accepted for a mortgage with a great interest rate.

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The larger your deposit, the better

You may only need a 5% mortgage deposit in order to apply for a shared ownership mortgage. However, the more money you put towards a deposit, the less you’ll need to borrow from your mortgage lender and the lower your monthly repayments will be. These lower repayments will make it easier for you to pass a lender’s affordability assessment.

Another way to lower your monthly mortgage repayments is to buy a smaller percentage of your property. However, this could harm your chances of passing affordability assessments, because it will increase the amount of rent you have to pay on the rest of the property.

Pay off debts

If you have debts you’re paying interest on, reduce them as much as possible. This will improve your perceived affordability. If you have access to credit that you’re not using, it’s best to close these accounts, as lenders can perceive additional access to credit as an opportunity for you to get into further debt.

Know what you can afford

The higher the value of your property, the more your mortgage and rent will cost you.

Make sure you apply to live in a property you’ll be able to afford to live in. Use an online shared ownership costs calculator to help you work this out.

A professional mortgage adviser will also be able to give you tailored advice on the size of the mortgage you’re likely to be approved for.

Improve your credit score

Your credit score is a numerical indicator of how well you’ve managed debt in the past. Lenders will run a credit check on you when you apply for a mortgage, and this plays a huge role in its decision to either approve or reject your mortgage application.

You can improve your credit score by making timely repayments on debts and bills. Paying off a credit card in full every month helps to improve your credit score. Successfully paying off your utility bills by direct debit will do the same. Start doing this now, if you’re not already.

Missed repayments and going overdrawn can harm your credit score – and your chances of being approved for a mortgage.

Don’t make too many mortgage applications

Every time you apply for a mortgage, or any financial product, the lender will run a credit check on you.

Credit checks cause a temporary reduction in your credit score, so it’s best to avoid applying for too many in the run-up to your mortgage application.

Instead of applying for mortgages from multiple lenders, have a mortgage adviser suggest the lenders most likely to approve you. This can save so much hassle and improve your overall chances of being granted a mortgage.

Check your credit report for errors

It’s possible that your credit report has errors that are affecting your chances of being approved for a mortgage. You can check your report – and amend any errors you find – by contacting any of the UK’s three major credit reference agencies, Experian, Equifax or TransUnion (Callcredit). Look for errors regarding your personal details, as well as mistakes surrounding your financial history. This service is free of charge. It’s also beneficial to ensure your correct name and address is on the electoral roll.

Prepare the right documentation

Mortgage lenders will want to see a host of documents to help with their affordability checks.

These include:

  • Payslips
  • Bank statements
  • Proof of identity
  • Proof of savings
  • Information about existing debts and credit arrangements

The more information you can provide, the better. A lot of smaller lenders that specialise in shared ownership mortgages use “manual underwriting” to assess your affordability and will therefore require more documents.

If you’re self-employed, it’s particularly important to have your financial documentation in order. Lenders typically want to see at least one year’s (and ideally three or more) worth of accounts to assess your affordability.

Frequently asked questions about shared ownership

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