Whether you are buying a home for the first time, moving or purely switching lenders, there are certain things you can do to be ‘mortgage ready’.
Affordability testing
Lenders will perform an ‘affordability test’ when applying for a mortgage. They will also ask to see your most recent three months’ bank statements (for your main account and any other active accounts that you may have). Bank account conduct is a solid gauge to demonstrate your ability to keep your finances in order in a mortgaged world.
Outstanding debt
If you have any outstanding loans or credit cards, try to pay these off before you apply for your mortgage – where possible, of course – and avoid taking out any more loans. If you have any of these that will remain, that’s ok! Although these could impact the amount, the lender is prepared to offer you. We can discuss this with you in more detail when we chat about your current position.
If you have current unsecured credit (loans, credit cards, a car on Hire Purchase, etc), it’s vitally important these have been maintained well. Ideally, your credit card debt will not increase month on month as this suggests you rely upon this to support your day-to-day living. Payday loans also create a similar perception for some lenders – they will want to avoid seeing sight of these in the 12 months before you applying for your mortgage. Don’t worry if you have had any credit issues. It does happen and we can help! Click here for more info.
If you have missed any payments in the past, found yourself in arrangements, or had any defaults (CCJs bankruptcy or IVA), there are still lenders out there for you, but expect the rates you are charged to be a little higher than mainstream lenders.
Identification
Ensure you have valid identification, such as a passport and/or driving license. All bank accounts/bills should be registered at your current address. It is also helpful to be registered on the electoral roll. So everything is easy to trace.
Employment
Ideally, you should be in employment for at least three months and out of ‘probation’ if you had one set. This is not ‘set in stone’ but will open more lenders for you. If you have one, it’s normal for a lender to ask for your three most recent payslips and your last P60.
If you are self-employed, you will need to provide at least one year of self-assessment records. Two years plus will open even more lenders for you.
Soft searching
Before you search in detail for your mortgage, it is prudent to know exactly how much you can borrow and what the approximate costs are. This may involve a ‘soft search’ being carried out. This will help you establish the price range of your search (we can do this together – contact us!). Estate agents nowadays like to see what is called ‘an agreement in principle’ in place and proof of your deposit (own savings or a gift) before you make an offer on a property.
If you are considering buying your first home and want to chat, call me on 01277 633123. Having a friendly (no-commitment) voice at the end of the phone is always helpful!