So you think you’re ready to get a mortgage and buy a house? We asked mortgage adviser Jules Held, how to save time and stress by preparing properly before applying.
Jules is the founding director of Maytree Mortgages, an independent mortgage brokers. She explained to Home@ Planetfem that surprisingly, most people aren’t aware of exactly what is required of them before a mortgage application can be submitted. In this two-part series, we look to answer some imperative questions she recommends are satisfied beforehand, to make sure you are ready to get the best loan deal possible.
Are your finances under control?
Do you often spend more than you earn? What does your current account look like? Can you actually afford monthly mortgage payments? These are things lenders will check with you during an ‘affordability test’, before agreeing that you’re ready to apply for a mortgage.
Since 26 April 2014, lenders have been required by law to make sure that potential borrowers are in a healthy financial position before applying for a loan. We’re talking all monies in and out. Even your drinking spending habits will get assessed – be prepared to be asked ‘how much do you spend on wine a week?’ The gym, hairdressers, takeaways, etc. All these outgoings will be taken into consideration in the test. It could take anywhere up to 3 hours, after which a lender or a broker can decide if you’re ready to apply for a mortgage in principle.
You will need to provide documented evidence of spending – statements, payslips, agreements, proof of payments and earnings. And remember, only taxable earnings are taken into consideration.
What’s your credit rating?
To get the best deals, you will need to make sure your finances are in order as above. Jules recommends you get online and check your credit score (Experian, This is Money, Equifax) long before you decide to apply. Remember, the better your credit rating, the more options you will have when looking for the best mortgage deal. Do not miss or default bill payments! Even one missed payment in the preceding 2-year period can be detrimental to your credit rating. Make sure you have a credit history too. Credit cards with limits over £1,000 can boost credit scores – it shows that banks are willing to lend to you – you’re good for the money.
Are you on a zero-hours contract? Make sure you have a minimum of 12-months payslips beforehand. It is best to ensure you can show as regular and stable monthly income as possible in order to persuade the lenders that your income is secure.
Self-employed? Be aware that while you need a minimum of 12-months assessments/accounts, some lenders will require two year’s worth, and even with two years, your current year’s figures are not guaranteed to be used. Lenders may still decide to use an average of the last two years.
So remember: before you apply for a mortgage, you should have ready your paperwork, details and figures on your financial earnings and outgoings to hand to make sure the process goes smoothly, and the broker can work your financial status to get you the best and most suitable deal.
Tomorrow, we will look at the benefits of choosing an independent broker.
Jules Held is managing director of Maytree Mortgages, an independent Mortgage Brokers based in Epsom. Maytree Mortgages delivers impartial mortgage and protection advice, specialising in securing mortgages for first-time buyers, people looking to move home, remortgages and buy-to-let mortgages. Call 0203 623 8497 or email email@example.com for a no-obligation chat.