Mortgage Application Tips: Avoiding Common Pitfalls

In recent years, the residential mortgage market has significantly increased the products available to prospective property buyers and home movers. With lenders competing to provide attractive products, applying for a mortgage can feel like pulling teeth!

Whether you are an NHS or self-employed dentist professional, this article helps to identify common pitfalls to help you successfully navigate your way to property ownership.

Common Challenges To Overcome

When applying for a residential mortgage, several challenges may arise during application:

• Complex income calculations: For many registered dentists, you’ll likely have complex income structures that lenders will quantify differently to typical PAYE employment, particularly if you have a mix of NHS, private work, locum and/or self-employed earnings. Evidencing income is not always as easy as providing payslips.

• Change in employment status: As an established dentist, you may have just bought into a new practice, but not all lenders will recognise future earnings.

• Affordability assessments: Mortgage lenders assess income and expenditure to determine sustainable borrowing levels, but acknowledge this can be challenging when you have invested in your career and recognise some applicants are left with large student loan payments. Prepare in advance by reviewing your spending habits and reducing unnecessary outgoings before applying.

• Deposit requirements: Whilst some lenders offer high loan-to-value (LTV) products, securing a competitive interest rate typically requires a substantial deposit.

• Credit history concerns: Previous financial difficulties can impact mortgage eligibility. Ensure your credit report is accurate and evidence responsible financial behaviour in the months leading up to application submission.

• Self-employment complexities: Those without traditional employment face additional verification requirements. This is because self-employed income can fluctuate, and lenders want to ensure you can make the monthly mortgage payments comfortably. Overcome this by maintaining financial records and engage an accountant to produce comprehensive documentation that proves you are a reliable borrower.

• Property suitability: Not all properties meet lender criteria. For example, properties without a kitchen or a bathroom will likely be declined. Research property types that lenders favour and consider a survey to identify potential issues before proceeding.

For applicants exploring Buy to Let (BTL) mortgages, these challenges still apply but in addition, rental incomes are also important. There are certain ‘stress tests’ carried out by lenders to assess BTL affordability. They’ll want to ensure the expected rent can cover the mortgage - both now and in the future - and any property maintenance and income tax liabilities that may arise from owning the property, can be comfortably paid.

Top Application Tips

Evidence income stability:

Lenders typically prefer applicants with consistent income history, even if self-employed. If employed, try to avoid changing jobs just before applying, and if self-employed, collate together your certified accounts and SA302 form/tax overview for the past 2-3 years.

There are lenders that understand lending to dentist professionals and can look at various sources of income such as locum earnings, recently self-employed dentists, or those that might receive income from a number of different sources.

Optimise your credit profile:

Review your credit report with major credit score agencies up to six months before applying. Knowing what is on your credit file can help you rectify any inaccuracies and can ensure all accounts show true and responsible management of your finances.

Save a larger deposit:

The good news is there are plenty of mortgage options available with a 5% deposit these days, and even some that require a smaller deposit. However, if you aim for a larger deposit you’ll give yourself a better chance of accessing competitive interest rates.

Manage existing debts:

Reducing outstanding debts can significantly benefit an application because it improves your debt-to-income ratio and strengthens your affordability assessment, often resulting in better mortgage rates and terms.

Prepare comprehensive documentation:

For all mortgage applications, gathering recent payslips/accounts evidence, bank statements, identification documents, and tax returns for the self-employed, will help to streamline the application process.

Benefits of Mortgage Advice

As a busy professional dentist looking to avoid any mortgage application obstacles, engaging a qualified mortgage adviser offers significant advantages.

Advisers maintain current knowledge of the products available, including exclusive products not directly accessible to the general market. They can also identify the lenders most likely to approve your specific circumstances, potentially saving considerable time by preventing unnecessary applications that could impact your credit score.

Acting under the regulatory oversight of the Financial Conduct Authority (FCA), advisers act in your best interest and provide personalised guidance tailored to your financial situation. Their expertise proves particularly valuable for complex cases such as self-employment or past credit issues.

What is more, advisers manage much of the paperwork and communication with lenders, reducing stress and ensuring applications are completed accurately.

For dentist professionals eager to receive tailored advice about your residential mortgage options, contact us today.

Your home may be repossessed if you do not keep up repayments on your mortgage. Some buy to let mortgages are not regulated by the Financial Conduct Authority.