If you’re thinking about how to get a mortgage, you should be aware of the factors that affect your eligibility. We have put together 9 top tips to help guide you:
1. Make Sure you have a good credit score Before applying for a mortgage, get a copy of your credit report. Your credit history will be available from all the main credit reference agencies such as Experian or Equifax. This will allow you to see what lenders review when considering your application. If your credit rating isn’t looking that great, there are lots of simple things you can do which can give your score a boost. For example – clear and close down any old credit card accounts and pay that old outstanding bill that you might have forgotten about.
2. Clear any debts Before you apply for a mortgage, try to 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. It will also mean you will potentially be able to borrow more when it comes to a lender’s affordability calculations.
3. Do your sums As a very basic rule of thumb and depending on how old you are, mortgage companies lend up to 4 x your income and this, together with any deposit gives you a rough idea of the value of properties that you can consider. However, this is only a rough guide; some lenders might use slightly lower multiples. Furthermore, the amount they loan is impacted by your ‘affordability assessment.’ This is something that all mortgage companies do and it takes into account your credit score, outgoings and general day to day expenditure There are many mortgage calculators available on line BUT BEWARE! try and avoid putting in personal details regarding address and names since this could impact on your credit rating. It’s perhaps best to speak to an independent expert first.
4. Try and remain in the same job and with the same employer Most lenders will want to see that you’ve been with your employer for a decent length of time before they’ll give you a mortgage, so if you’re thinking of switching jobs, it’s a good idea to hang on until you’ve got your mortgage in place. Usually, it’s a good idea to have been in your existing job for at least six months to a year before applying.
5. Proof of income Mortgage lenders will want to see proof of how much you earn and for this, your word alone isn’t enough! You will need a P60 form, which you get every year from your employer, showing a summary of your pay and how much tax has been deducted. You’re also likely to be asked for three months’ worth of bank statements and payslips so the lender can look at your spending habits and outgoings. If you are self-employed, lenders will want proof that you’ll be able to keep up repayments, so they’ll usually ask to see an SA302 form relating to the last three years from HMRC or your full accounts for the last three years.
6. The bigger the deposit the better The more you can save and offer as a deposit, the bigger the choice of mortgages that will be available to you. Lenders reserve their best rates for those with large deposits.
7. Consider buying with someone else If you’re struggling to build a big enough deposit or raise a high enough mortgage, you might want to think about buying with someone else. But remember that this is a big commitment, so you’ll need to sit down and work out with the other person what would happen if one of you wanted to move in future.
8. Don’t ‘Chop and Change’ your application Once you’ve started your mortgage application, don’t mess around with it and start changing figures as it’s very much a ‘red flag’ to perspective lenders and could spoil your chance of obtaining a mortgage.
9. Get FREE advice and help from an independent specialist If expert advice is free, then you would be daft not to take it – even if they tell you one or two things that you know already! It might be just one small tip that makes all the difference. If possible, speak to an independent mortgage advisor like Dunham McCarthy since they’re not biased to any particular mortgage provider; they will give you a larger, more accurate picture of all options available to you.