Ten Top Tips for Getting a Mortgage
Taking out a mortgage is likely to be the biggest financial commitment you will ever make, so it is vital you find the best deal you can. There is plenty you can do to improve your chances of getting a mortgage and following our top ten tips should help you secure the mortgage you want.
Pretty much all lenders will run a credit check and credit score, which is linked to the credit referencing agencies. If you are concerned that your credit score might not be that great, you should contact Experian or Equifax. If your credit rating isn’t good, you should try and improve it.
There are lots of simple things you can do which can give your score a boost, such as ensuring you are on the Electoral Roll and regularly paying any credit that you may have.
A good starting point is your own budget. Although most lenders will assess how much they will lend you on affordability, it is a good idea to sit down and work out your budget before applying for a mortgage.
You will need to be sure you can borrow enough to cover the purchase of the property and that you will have enough spare to pay all the associated costs and fees. Monthly mortgage repayments will depend on how much you want to borrow (and over how long) and also the interest rate charged.
You also need to consider what your payments are now but also in the future should interest rates rise.
Most lenders will want to see that you have been in your job for a decent length of time before they will offer you a mortgage. So if you are thinking of switching jobs, it is a good idea to hang on until you’ve got your mortgage in place. Usually it is better if you have been in your existing job for at least 3-6 months before applying.
John Lineham commented: “If someone has recently changed their job, then it need not be a problem but if still in a probationary period, it makes sense to double-check if the lender will be happy to lend before it finishes. Even then, there should be lenders that will consider the situation”
If you are submitting a mortgage application, the last thing any prospective lender is going to want to see is that you owe a load of cash on credit cards, or you have outstanding loans.
Before you apply for a mortgage, try and reduce any debts you have. This will help demonstrate that you manage your money responsibly and will mean any mortgage application you make is more likely to succeed. Not only will this improve your credit score but it will also mean you will potentially be able to borrow more when it comes to a lender’s affordability calculations.
Mortgage lenders will want to see proof of how much you earn, so if you are employed, it will usually be three months’ pay slips and if your income is subject to bonuses or commission, a P60 would show how much you have earned over the year.
You are also likely to be asked for six months’ worth of bank statements so the lender can look at both how much you have coming in, as well as your outgoings.
Getting a mortgage when you are self-employed can sometimes be tricky, especially if you have only recently decided to go it alone. Lenders want to prove that you will be able to keep up repayments so they usually ask to see three years’ worth of accounts before they will agree to give you a mortgage.
More recently, many lenders will base the amount you can borrow on the amount of tax you have paid and will ask to look at your tax computations from the Inland Revenue. If you don’t have a full three years’ accounts, there are lenders that will accept less than three years.
The more you can save up to put down as a deposit, the bigger the choice of mortgages that will be available to you.
Lenders reserve their best rates for those with hefty deposits, so you will also benefit from lower monthly payments because you will have qualified for a better deal. Deposits can come from many different forms such as savings, investments, inheritance or gifts but the lender will require evidence of this
If you are struggling to find sufficient deposit, or your income is not enough to secure a loan on your own, it may be a good idea to buy with somebody else. After all, two lots of deposit and two lots of incomes would certainly get you more for your money.
However, this is a big commitment so you will need to sit down and work out with the other person what would happen if one of you wanted to move in the future.
If you have decided you are buying a property, getting a mortgage agreed in principle is a great idea. This will become very useful when looking for property, as often estate agents will ask if you have this in place.
You should not however, apply to lots of different lenders as this can have an effect on your credit score.
If you are struggling to find the right mortgage deal, or you don’t know what you would be eligible for or how much you can borrow, it might be a good idea to enlist the help of a mortgage broker. They can research the market for you and help you through the application process so you don’t have to go it alone.
An independent broker would be able to show you the whole of the intermediary market and give you more choice. Flagstone are independent mortgage brokers and will not only find you the best deal but also process your application in conjunction with their mortgage service centre.