August 2, 2018 1:49 pm
Can I afford to buy a home?
Buying a property is one of the biggest purchases of your life. The first step to moving is to work out what mortgage can afford.
While looking at your assets, it is important to be realistic. Plan out all of your current monthly outgoings, not forgetting about those occasional nights out and trips to the cinema. Getting a mortgage is a big commitment, but you don't want to be left in the situation where you can't afford to treat yourself at the same time. By looking at what you are currently spending, you can sensibly work out what you can afford to pay a month on your mortgage and look at areas you can cut back on to get the property of your dreams.
Before you speak to a mortgage lender, you need to be prepared. You will be asked to provide a lot of information that you may not have to hand straight away, so it's vital you plan ahead to boost your chances when it comes to applying for a mortgage. Don't worry, we've made it easy for you.
6 to 12 months in advance
Register to vote
One of the main ways that a lender will verify your identity & address is to see if you are registered to vote at your current address. If you have not already registered, we would advise that you do this straight away, you can register to vote online at the gov website. If you are unable to register for various reasons, don't worry, your lender will most simply ask for an alternative form of identification.
Save up for your deposit
The earlier you can start saving up for your dream home, the better. The larger your deposit will affect the amount you pay each month for your mortgage. The minimum deposit required for a property is 5%, but it is more likely you will be needing 10% or higher, so the more you can save the better!
Make sure your credit history is in shape
The better your credit history, the more you will look like a responsible borrower. You can do this by;
- Pay off any debts on time
- Pay all your bills on time
- Close old, inactive accounts
- Don’t apply for additional credit, especially payday loans
- Avoid going into your overdraft
- Close any out-of-date joint current accounts that you hold with someone else, in case the other individuals weren’t responsible with their money. If you’re still linked to them, their poor record can negatively impact yours
Don't forget, your credit record is kept for the last 6 years. This means any loans or failed payments in that time will show up. Even if you have paid the loan off in this time in full, a lender will look at the fact you have taken out a loan as an indicator you may not be able to pay back your repayments.
Maintain job stability
The longer you have been at your current job, the better. This will give your lender confidence in your job security. We would advise that 3 to 6 months be the minimum at your current job.
Check your credit record
Before a lender looks at your credit record, make sure it is in the best possible shape, as they use this to look at your payment behaviour and ultimately decide if they will or will not lend to you. Don't be put off if there are parts of your credit record that aren't the best, different lenders will score you against different parts of your history, so if one lender does not want to lend to you, that does not mean that all lenders won't.
Up to 6 months in advance
Gather important documents
To get a better picture of your financial situation, a mortgage lender will look at the following things;
- Proof of income / 3 months’ payslips (they might contact your employer)
- Last 3 months’ bank statements
- Proof of current UK address, such as a council tax bill or a utility bill from the last 3 months
- Proof of bonuses/commission
- Your latest P60
- Your last 3 years’ accounts or tax returns (if you’re self-employed)
- Self Assessment tax return (if you’re self-employed)
- Proof of deposits (e.g. savings account statements)
- Proof of ID (passport or photocard driving license)
- A gift letter if you’re getting help with your deposit, stating that the person is gifting you the money and not lending it to you
Familiarise yourself with your spending
Before you get a mortgage, you will be asked to sit down with your mortgage lender. They will conduct a 1 - 3 hour long interview with you to try and find out about your spending habits. Don't be alarmed, this is for your own benefit, this way they are able to recommend a mortgage that is affordable for you and won't stretch you to your limits. This interview won't be arranged until later on in the process, but it is worthwhile to familiarise yourself with the following so you are prepared when you are asked;
- Essential expenses, like groceries, utility bills, and household cleaning
- The basic quality of living costs, like clothes, holidays, household goods and childcare
- Repayments and other commitments
By reviewing your spends early on, you can see areas where you can cut back on to save yourself some money. Be aware, they will also ask if you have any future plans in place that will affect the amount of money coming into your home.
How much will I be able to borrow?
Different lenders will look at different requirements when it comes to calculating how much they are prepared to lend you. In some cases, lenders may choose not to lend to you at all, so it is worth getting some advice from an expert who can point you in the right direction. The most common criteria a mortgage lender will look at is; your income, the size of your deposit, your regular expenditure and your credit rating. If you are applying for a joint application, the previous points will be considered for each of you.
(Please note, the figures calculated will not be definite and may differ for different lenders. The homeowners property home may be repossessed if they do not keep up repayments on a mortgage.)
We have partnered with Strathon Park Financial, an experienced team of mortgage advisors. They are on hand that will work with you through what can be a daunting and often complex process.
For more information, visit our mortgages page on our website and request a call.
Helping you get an affordable mortgage
When it comes to applying to a mortgage, you will be required to provide a large amount of details so that an accurate estimate can be calculated. The more details you are able to provide, the better your mortgage advisor can match you to the best mortgage for your circumstances.
Don't forget to factor in all of the other costs involved in buying a home, besides the cost of the mortgage itself. This could be things such as the buildings insurance and stamp duty, along with the cost of moving from your current home, agents/solicitors fees, survey costs along with your mortgage advisor fees. The earlier on you can gather all of these additional costs, the more prepared you are.
If you want a more concrete estimate, we would advise you to speak to a mortgage advisor directly. They can take a closer look at your situation and give you better advice on your next course of action. This is especially important for those who are self-employed and mortgage calculators simply don't give an accurate estimate.
It is important to factor in all of the possibilities that could arise that could ultimately affect your mortgage. This will help you to not push yourself to your spending limit.
This post was written by millermetcalfe