So, you’ve managed to save some money and are now serious about applying for your mortgage. Congratulations! While it is a very exciting time, it can still be very stressful, especially for first time home loan applicants. There’s quite a bit to know before handing in your application and crossing your fingers.
In this post we’ll discuss our top four tips to ensure you get that mortgage and your dream home without breaking a sweat. Let’s get started.
#1 Know Your Credit Score
Even if you think your credit score looks good, it is advisable to grab a copy of it before you go ahead and apply for that mortgage. This will enable you to have a look at what lenders will see once you have handed in your mortgage application.
If it’s not looking great at the moment, don’t fret. There are some ways you can get that credit score in check before applying for a home loan. Firstly, you can make sure that the accounts you are no longer using are closed. Secondly, you can ensure that you are on the electoral roll.
#2 Do Some Calculus
Next up, you need to know your finances very well. If you don’t already have a budget, draw up a comprehensive budget to get an overview of your income and expenses. Not sure how to do this? Read our post on how to successfully implement a budget.
This will allow you to ascertain how much you can afford to put down as deposit and pay off monthly afterwards. Your mortgage payments will depend on the term, interest rate and amount you want to borrow. Having a clear idea of your finances will ensure you know what you are agreeing to.
#3 Proof of Income and Stability Counts
No matter what type of loan you apply for, you will almost certainly always be asked to provide proof of income. This is to ensure that you can in fact afford the mortgage and to see what your income looks like. Another factor that plays a role is stability and employment.
If you’ve just started a new job, it may be more difficult to get your mortgage application approved. Lenders prefer approving loans to people who has a stable history of employment without any sudden changes. If you have started a new job, applying for your mortgage after 3-6 months is advisable.
#4 Self-Employed? Show Your Accounts
Now, a lot of people are self-employed nowadays. Even though lenders would much rather approve a mortgage application from someone with a stable income, you can still apply for a mortgage. It might be a bit more difficult, but it is completely possible.
If this is the case, be sure that you have copies of all your finances over the past three months ready when you apply. The lender can also request a SA302 from HMRC to see whether or not you will be able to pay the monthly instalments. If you can’t provide these, you might want to wait a bit on that application!
Keep in mind that paying a bigger deposit will also count in your favour. This will mean that your monthly repayments will be smaller, while lenders can provide a better deal. And, if all else fails, why not partner up with someone and buy a house together?