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Thinking about buyng your own home?
Posted on 15/01/2020 by Sue Stevens
What to do before you apply for a mortgage
For you or your loved ones getting a mortgage may seem a little bit like climbing Everest. The summit is incredibly far away and it is going to be a long journey that requires a lot of commitment. That’s because the process of buying a home doesn’t start by selecting a property that is within your budget – it can take months, even years of preparation to get fully mortgage-ready.
There are a number of things you can do in advance to prepare for a mortgage application that will make the whole process a lot easier and smoother for you.
These include but are not limited to:
Saving for a deposit
This might sound like a simple and obvious piece of advice but it is still incredibly important. The more you are able to save for a deposit means the less you will need to borrow from the lender, which means that you are taking on less debt. This means that you will have a smaller mortgage in comparison to the property value, which will generally allow you access to lower mortgage rates so you will be paying less interest across the mortgage term. Ultimately having a larger deposit can save you money in the long run and your adviser will be able to help you secure the deal that’s right for you dependant on the size of your deposit.
You should also consider the most suitable way to save and a Lifetime ISA could be useful in helping you build a deposit by providing a 25% bonus boost to your savings which could be up to £1,000 per annum.
Saving for other fees
Whilst saving for a deposit is somewhat obvious, there are also a number of other fees and costs that you realistically need to be saving for before applying for a mortgage. There are conveyancing fees, paid to your solicitor to cover all of the legal work associated with buying a home, and moving costs that, among other things, need to be considered.
Register to vote
Registering to vote, if you are not already on the electoral register, is the easiest thing you can do to get yourself mortgage-ready. Remember it can take 6 weeks or even longer to appear on the electoral roll. Without being registered it can be difficult to get a mortgage as the majority of lenders use the electoral roll data for identity checks. For this reason, it is also important that you make sure your address history is up to date and that your forms of identification are accurate.
Most lenders like to see at least 6 months employment history with the same employer and that you are not within any probation period. Be ready to provide any previous P60’s (annual statements of income) and 3-6 months salary slips.
Build up your credit score and review your credit history
They are four main Credit Reference Agencies: Crediva, Equifax, Experian and Transunion. You can check your credit report with these agencies or use one of the free services such as Clearscore or Noddle. This will allow you to dispute any inaccuracies so that lenders will receive the correct information on your ability to repay your debts. Your credit score, on the other hand, will give an indication of how creditworthy lenders may find you. If your score is low, you may want to see if there are any credit habits that you need to improve on before making a mortgage application. It is important to note, though, that scoring bands can vary among different credit reference agencies which is why seeking professional advice is important.
Clear your debt and keep any debt manageable
Lenders typically prefer applicants with no loans which includes a car that may have been purchased using lease finance. If you are in a position to be able to clear your debts completely this will make you more attractive to potential lenders. A credit card that is used modestly can be helpful as this will demonstrate your ability to manage credit satisfactorily.
Do not use pay day loans
Many mortgage companies will not accept applicants who use this type of emergency finance.
Actively manage your finances
Make sure all bills are paid on time and where possible by direct debit and there are no late or missed payments. Avoid minor disputes for parking or small outstanding debts when changing mobile phone providers.
Whilst this is only an overview of just some of the things you can do to get yourself mortgage-ready your mortgage adviser will be able to give you more detail on how to fully prepare yourself.
If you would like to discuss the options available to you, contact your Dentons Wealth adviser today.