The hardest part when beginning the journey to buying your first home is making sure that you have given yourself the best chance of being accepted for a mortgage. Hopefully, this is where this short blog should help you get yourself in the best position financially for the biggest purchase you will probably ever make.
Making sure you are 'Mortgage Ready' will benefit you not only in obtaining that all important mortgage but will also hopefully put in some good ground work to keep you financially stable for many years to come.
Below I will go through some of the hurdles you may face when applying for a mortgage to purchase your new dream home and how to hopefully overcome these.
Credit score and credit history
This is the most important factor you need to consider when thinking about buying a home and applying for a mortgage. Your credit history and your current credit score will impact upon the lenders available to you and the interest rates and subsequent fees you may pay. Making sure that your credit file is in the best shape it can be before starting to apply for mortgages is really important. You can get a copy of your credit report from many different places now and there are several different credit reference agencies that hold information on you and your credit history. The three main credit reference agencies are Equifax, Experian and Transunion. Lenders will use a variety of these when assessing your application, so it can be helpful to know what information all three hold on you.
This is where we would recommend a 30-day free trial (make sure you cancel before the end of the trial or you will be charged!) with a company called Checkmyfile, they use all three of these credit reference agencies and put them all together in one report.
Understanding your credit report once you have it can be quite daunting, feel free to contact us to discuss the results of your report if you are not sure about any of the entries or something doesn't quite look right. We are here to help you understand your credit situation and what we can do to potentially improve this, if required.
The report will provide you with a breakdown of your payment history for any and all credit taken out over the last 6 years. This will also start to include tenants rental payments soon too. Most reports will also provide you with a credit score. This is a number they have provided based on your payment history and a number of other factors. The higher this number is, the better! Again if you are unsure you can speak to us to discuss this further and see how your score will affect a potential mortgage application.
Income and affordability
This is another key area that you need to make sure you have reviewed. You will normally need your last 3-6 months payslips and latest P60 if you are employed and if self-employed you will need your last 3 years Tax Calculations and Tax Year Overviews. I have already written another blog giving you instructions on how to obtain these which you can find here.
Bank statements for the last 3-6 months will also be required so make sure these are at your current home address and that you do not have any bounced direct debits, exceed your overdraft (if applicable), excessive gambling, or any other issues that could cause a lender to decline your application. We review hundreds of bank statements every years so can help you understand what the lenders expect to see when reviewing yours. Get in touch to discuss this further if you need help.
Deposits
How much deposit you have available can make a difference to the interest rates and fees you will pay. If, for example, you wish to take out a 95% mortgage then the interest rate for this type of high loan to value mortgage would be higher than for say a 75% mortgage as it is higher risk to the lender. There are different ways in which you can increase the amount of deposit you have available. This can vary from Help to Buy schemes which means the Government will provide you with an equity loan for 20%, more information about Help to Buy can be found here.
Understanding the Home Buying Process
You will be able to find a useful video on our website which gives you an insight into the home buying process from start to finish, this can be found here.
Additional services provided
We are able to help you find a suitable local solicitors firm to assist you with the legal purchase of your property and also discuss insurance and protection for your mortgage from life insurance to buildings and contents insurance and everything in between.
Using a Mortgage Adviser
We are experts in what we do, helping hundreds of clients every year purchase and remortgage their properties. We are here to help you navigate your way through the complex nature of purchasing a home and obtaining a mortgage. We also keep that relationship going after you are moved in. We keep in touch with you to make sure that you have support whenever you may need it.
Feel free to get in touch to see how we can help you get 'Mortgage Ready today!
Please remember, your home may be repossessed if you do not keep up repayments on your mortgage or any loan secured against it.
