Getting a mortgage can seem complex and a bit scary with tons of questions and lots of hurdles in the way. There are a lot of factors that can play into the decision from a lender and by having a good understanding beforehand of what these are, you are better placed to know how well your application might do. Let’s look at the top 10 tips for getting a mortgage. Read our mortgage tips below.
1. Understand your credit report
Mortgages might work a little differently to a standard loan or credit card, but your credit report can still play a big part. That’s why it is a good idea to get a copy of your first and see what is on it. Experian or Equifax are two of the big names in credit reports and let you see what a lender will see when they review your application. Make sure it is all accurate and there are no issues.
2. Do your sums
You want to do some basic sums before you start looking at mortgages to see what kind of costs are involved, how you will cover them and what you can afford to pay each month for the payment.
There are some good mortgage calculators out there that take all the details and give you an insight into what mortgage companies do when they work these things out. Using such a calculator is among our top mortgage tips.
3. Job consistency is good
It can be a good idea to have been in your existing job for a while when you apply for a mortgage as this shows consistent income. Of course, this might not apply f you plan to move to a different area of the country and get a new job! But mortgage companies like to see income coming in steadily for at least six months.
4. Debts can hold you back
Debts will factor into the decision and if you have a lot of debt, this could hamper your ability to get a mortgage with some companies – which is why a mortgage broker can be a good idea. Try to reduce your debts as this also frees up money each month to pay the mortgage.
Debts will factor into the decision and if you have a lot of debt, this could hamper your ability to get a mortgage with some companies
5. Have proof of income
You will also need to show proof of income such as a P60 form or payslips. These are official documents showing your income. You will also usually need at least 3 months of bank statements for outgoings.
UK Mortgage questions:
Some of the top factors that can lead to your mortgage application to be turned down regard your current financial status. If you are in too much debt, have no good credit, or there are credit errors and many credit applications on your credit report, this will reflect negatively with your potential lender. If you have many recent addresses or change jobs frequently, this may also have an adverse effect on your application. If you submit an application with errors regarding your personal or financial information, this will likely lead to a denied request. If you are applying for a mortgage which is deemed unaffordable for your personal financial situation, this will also most likely lead to the rejection of your application.
A lender primarily focuses on your ability to make frequent and adequate mortgage repayments for the duration of your loan. If you have no job, this may adversely affect your ability to be approved for a mortgage. However, if your total monthly income is considered adequate by your lender, even without you having a job, then they would likely approve your application.
Typically, major banks or other lenders in the UK require that you put down at least 5% of the desired property’s value as a deposit to approve your application. The lender would then proceed to lend you the remaining 95% of the value of the property. For instance, if you wish to buy a £200,000 property, you would be required to put down a deposit of £10,000 and borrow the remaining £190,000 from the lender.
6. You will need something from HMRC if you are self-employed
If you are self-employed you will need something from HMRC to show how much profit you have made. This form is known as a SA302 and can be downloaded from the Government Gateway if you are signed up for this or contact HMRC). Mortgage companies will usually ask for the last three years’ worth unless you haven’t been self-employed for that long. Without them, it can be difficult to get a mortgage.
7. More deposit is good
Most companies will want a minimum of 5% deposit to consider you for a mortgage but in reality, the more you have the better. Mortgage companies look at the Loan to Value ratio and most won’t go above 90%. So if you are looking at a house worth £100,000, you would need at least £10,000 deposit to get to that figure. Don’t forget to take the current UK mortgage interest rate into consideration.
8. Buying together can be better
More income means more potential money available and a more secure situation for mortgage companies. One of our mortgage tips is that if you plan to share the house with a partner, a friend or family member, it can be a good idea to go in for the mortgage together. You also need to remember that it is a big commitment and make sure you are both on board for what it means. You might also want to plan for what happens if one of you decides you want to move out and no longer contribute to the mortgage.
9. Don’t keep changing the application
Once you start the application process, try not to change things as this can cause holdups in the buying process. Don’t suddenly decide you want to borrow more, or the deposit will be less – get everything organised before you start and trying to stick to it no matter what.
10. Check out a mortgage broker or advisor
Don’t think you have to do this on your own – mortgage advisors or brokers are there to help. They also deal with a wide range of products and aren’t tied with one bank or provider so they may be able to get a mortgage for you when high street banks don’t want to know. Heed the above mortgage tips before proceeding with your application.