Can you improve your chances of getting on the property ladder?
How to Get Ready to Apply for a Mortgage and Boost Your Borrowing Power
Enzo Mora, our founder and director, has some hot tips.
Now more than ever affordability is key to getting on the property ladder so understanding your finances and checking your credit score in advance will reap benefits.
How can I improve my credit score before applying for a mortgage?
Your credit score confirms your suitability for getting a mortgage so will come under scrutiny from lenders. Make sure you have a credit history by paying off any credit card in full on time each month as well as any subscriptions and council tax, as missed or late payments can reduce your score. Always pay your rent on time. Close credit cards you don’t use and avoid applying for credit six months before your mortgage application which could show a reliance on credit. Register on the electoral roll at your current address.
What do I need to show a lender?
You will need to have bank statements and pay slips for the last three months, proof of any bonuses or commission and your latest P60 (showing income and tax paid from each tax year). Proof of address, e.g. utility bills in your name, ID documents such as a passport, a bank or savings statement proving you have a deposit saved. If you are getting help from a relative with a deposit, you will need a letter from that person that has been validated by a solicitor.
Will I need to prove how I manage my finances?
Before applying for a mortgage you must look at your all your income and expenditure so you can prove you can afford mortgage repayments. Getting a mortgage is a long-term financial commitment. Take a careful look at your bank statements every month and set up a simple spread sheet to assess your income and outgoings. Make sure you are not in overdraft in the last three months and make savings by cutting back on non-essential items such as subscriptions. Tightening your budget before applying for a mortgage will help. Our advisers can look at all your income to see what counts for a lender.
I’ve moved in the last few years will this affect my application?
You must get your three-year address history right, including postcodes. Any incorrect addresses or details on credit cards, bank accounts or the tax office could delay or even scupper your application. So do a thorough check making sure your employer knows your current address and driving licences are updated, closing inactive accounts connected to former addresses and joint accounts linked to old flatmates or former partners.
How much deposit do I need?
Larger deposits mean you can access better mortgage interest rates as you will be borrowing less and be a lower risk to lenders. Pulling together all the money you can and reducing your outgoings or giving yourself longer to save will help to boost your deposit. If you are nearing a border of, say a 20% deposit, you may be able to reduce your loan to value by adding an extra £100. By using a mortgage broker like The Mortgage Brain we can look at the thresholds and make sure you qualify for the best rates.
Are they any ways I can save money when buying a property?
Yes! First-time buyers will not have to pay stamp duty to pay on a home costing up to £425,000 until 31 March 2025. For other buyers except second homeowners the threshold is £250,000. If you buy a brand-new home, you may find development specific offers such as deposit matching which could reduce your loan to value and help you access a lower interest rate. New properties also have better energy ratings so could save you money on energy bills.
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