Are you mortgage ready?



Getting your foot on the property ladder, let alone climbing up it might seem like an uphill struggle for many people looking to buy their first home. So let’s look at the main problems people have and how you can boost your chances of getting a good mortgage deal.

How does a lender view you?

Every lender will have its own set of criteria that it uses to decide whether to lend to you or not. If you fit their criteria you’ll probably be accepted, if you don’t you’ll more than likely be turned down.

Most lenders scorecards will be based on factors such as:

-How much you want to borrow

-How much deposit you have saved

-Your income and outgoings

-Your credit rating

-Existing debt

You need to make yourself an attractive candidate. Ways to do this will include:

-Checking your credit report before they do and ensuring you have no late or missed payments. Lenders will check credit reports to see if you have a good track record of repaying what you owe. You can get a free credit report at Clear Score and Noddle.

-Manage your available credit carefully as it’s all about striking a balance. If you have too much credit available on credit cards and overdrafts, lenders may think you could rack up a lot of debt by spending it all. However, if you get too close to your limits it may look like you’re at the edge of your finances. It’s the difference between your combined debit balances on your cards and bank accounts and your combined credit limits/overdraft limit. Credit agency Experian says that if you have debts, lenders prefer that they make up less than half your available credit. So if you’ve a combined limit of £10,000, they’d rather you use less than £5,000 of it.

 

Get on the electoral register

If you’re not on it you need to get on it. You can register on the electoral roll for free. Lenders use electoral roll data in identity checks to ensure you are who you say you are, and live where you say you live.

 

Employment status

One of the major factors in your eligibility for a mortgage is your employment status. The lender needs to know that you are going to be capable of paying the mortgage and will look closely at your employment history and income. Sticking with your employer while going through the home buying process is crucial as any changes to your employment or income status can stop or greatly delay the mortgage process.

 

Deposit

The higher % deposit you have the better mortgage deal you are likely to get. Mortgages are categorised according to their loan-to-value (LTV) which is the percentage of the mortgage as a value of the property. So if you have a 20% deposit, you will need an 80% LTV mortgage. Banks tend to have bands where mortgage rates become cheaper when the deposit increases. They get cheaper because the more equity you have the lower risk you are to the bank if your house loses its value.

Remember that every extra 5% deposit you can save will make a difference to your interest rate. So when saving for your deposit, think about where you could make extra savings such as:

-Taking a packed lunch to work rather than buying lunch out. The average cost of a meal deal at lunchtime is £3. Swapping this with something made at home could packet you an extra £720 per year!

-Switching to supermarket own label foods can save consumers an average of 20% on their weekly shop

If you’re finding it hard to save a deposit there are some options that can help:

-Available from April 2017, the Lifetime ISA is a savings account which offers a 25% bonus from the government when you buy your first home

Help to Buy is a range of government schemes to help house buyers with small deposits

 

If you would like any help or advice on mortgages please call Aspire on 01928 735510 or leave your details and we will call you back.

 

Your home may be repossessed if you do not keep up repayments on your mortgage.