06 Feb How can I prepare a mortgage application?
Whilst lenders may all have their own quirks and each will have a varying attitude to ‘risky’ borrowers, the rules are broadly speaking, very similar. When submitting an application, the lender will look to a few different sources to build a financial picture of you and the affordability of the mortgage.
The data that most lenders are looking for will include:
- Your income: In the main, this will be your salary but can include any other source of income. Pensions and investment income, as well as interest from savings and dividends from shares, can all be included.
- Your outgoings: Current utilities and fixed costs like childcare and maintenance should be included. In order to prove your outgoings, a lender will probably want to have sight of your last few months bank statements.
- Projected costs: They Many lenders will be keen to look at the possibility of your costs going up with increases in interest rates or the financial impact of more children. It’s key that your ability to service the mortgage remains intact even if there’s an unexpected change to your circumstances.
Once all this information has been collected, the lender will give you a score which effectively tells them whether you are accepted or not. The scores can differ greatly and the lender’s attitude and risk appetite is usually based on past experience. Lenders that are more relaxed about a low credit score will normally charge a higher rate of interest to reflect the increased risks involved. Unfortunately, the best interest rates generous lending criteria is reserved for those with the best credit.
This means that keeping up with current payments and ensuring that there are no arrears is important.
Incidentally, if you have no debt and no existing credit, this can count against you as a lender has no way to see how good you are at servicing your debts. So a little debt can be a good thing, as long as you keep it up to date!
Before you make a mortgage application
- Check your credit score. There are several websites that can give you your credit information and it’s well worth finding out whether there are any delinquent payments. We’ve found that some of our customers are caught out by mobile phone providers so well worth checking.
- Your credit score and your payment history is logged for six years so always try and keep up to date with payments. Best to keep a watchful eye on your credit score as it is possible to repair and improve it. E.g. Being on the electoral register can have a major effect on your credit score as well as satisfying any outstanding County Court Judgements.
- Get copies of your bank statements and credit card statements for at least the last three months.
- Get copies of payslips for at least the last three months along with details of any other income.
- Have your passport, driving licence or other official photo ID ready as this will be required by your mortgage advisor.
- Have original utility bill or council tax bill as proof of address (not downloaded from the internet). It has to be something sent to your house.
- Have some savings behind you as this could help if there was an unexpected expense like a rise in interest.
Buying a house can be stressful especially when purchasing with a mortgage. We’d always recommend using a mortgage specialist to conduct a whole of market exercise and get the very best deal. There are over 20,000 mortgage products available so it can be a bit of a minefield.
If you’d like help with any aspect of buying a house, please give us a call on 01325 776424.