Mortgage advice: The five things you need to do before applying for a mortgage | Personal Finance | Finance
Buying a home is probably the biggest purchase you’ll ever make, so you want to make sure you do it right. One in six mortgage holders have been rejected for a mortgage in the past, so it isn’t uncommon for lenders to turn you away if you don’t fit the criteria. Paul Stringer, Director of the Norton Finance Group has revealed the five steps to getting mortgage-ready.
If it’s time to buy your first home, you might be overwhelmed by everything you need to sort out.
Getting a mortgage isn’t easy, but there are ways you can set yourself up for success.
Mr Stringer said: “Whilst recent changes to the stamp duty threshold has led to a growing number of people looking to make the most of the tax break and make a property purchase, there are a number of points to consider before applying for a mortgage.”
Mr Stringer reveals five things to get done before you apply for a mortgage.
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Boost your credit score
The bank won’t lend you money for a mortgage if your credit score isn’t up to scratch, so take your time building this up before you apply.
Mr Stringer said: “Having a good credit score is nearly always essential for a bank to lend you the money for a mortgage at a low interest rate.
“A strong credit score serves as evidence to lenders that you are likely to pay back debts.
“Being able to demonstrate you can regularly keep up with payments, such as mobile phone bills, is often a requirement by lenders.
“It is worth checking you are not linked financially to anyone with a poor score i.e. have a joint bank account with, and cut ties if you do as their activities could impact you.
“Whilst different lenders in the UK may use alternative combinations of factors to consider whether you’d be eligible for a mortgage, ensuring you have a good credit score is a good place to start.”
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Save your deposit
The average house price in the UK is £256,000, and you’ll need at least 10 percent of that for the mortgage deposit.
Mr Stringer said: “Most banks require a 10 percent minimum deposit on a home purchase, however, the more you can contribute to this, the better.
“The size of your deposit will impact the rates you’re offered and the amount you can borrow. Regular saving also looks good to lenders.
“It is also important to note that it is becoming increasingly apparent that lenders want proof that first time buyers have managed to save most of their deposit individually and haven’t just relied on financial contributions from family.
“Financial responsibility can be proved with a good credit score.”
Have a dependable income
You’re going to need to prove that you have a dependable income so that you can cover the repayments.
Mr Stringer said: “Lenders are likely to take a close look at your employment status, income and history when you apply for a mortgage.
“They like to see a dependable and stable income, suitable to support your mortgage repayments so it is advisable to plan any job moves until after the process.
“This can make it slightly harder to get a mortgage for those who are self-employed as it can be trickier to prove a stable income.
“Lenders will also need to see proof of this income, so get a head start and gather your paperwork early.
“You may be asked for bank statements, your last P60 and proof of deposits, to name a few.”
Register to vote
Registering to vote not only raises your credit score, but it is also a key part in the mortgage approval process.
Mr Stringer said: “Often lenders will use the electoral role to check things such as names and addresses.
“As with all major financial decisions, it is important to consult the relevant experts to ensure you are fully prepared.
“It is also worth being prepared for additional costs post approval.
“When planning on buying a home, many only think of the monthly mortgage payments and the deposit however there are a number of additional costs that you need to consider.
“From valuation, surveyor, legal and estate agents’ fees before the move, removal costs during the move and then potentially leaseholder fees, maintenance costs and regular bills once you have moved.
“Whilst some of these are one off costs, others are a long-term commitment.
“Make sure you are aware of all the costs before you even consider taking out a mortgage to avoid any nasty surprises”