At the initial stage of getting a mortgage lenders are impressed with your credibility. We have put together a few simple steps to help you financially prepare you to get the mortgage you want.
In 2014 the Financial Policy Committee (FPC) stated that only 15% of all new mortgage lending offered by banks and building societies could be more than 4.5 times a person’s income. In 2017 it is apparent that mortgages that are more than 4.5 times the borrower's income, is only around 10% of all lending.
So, if you are looking to be in the bracket of the 15% of high loan-to-income applications, you will ideally need to have:
- A good deposit
- A steady income
- Little debt
- A good credit score
What you should do before applying for a mortgage
- Make sure that your credit accounts such as credit cards, mobile phone contracts and even utility services are managed showing no signs of delayed payments.
- Have a secure savings amount as this could help protect yourself against drops in income or increased monthly mortgage costs.
- Be registered to vote at your current address, so the lender can confirm who you are and where you live.
- Check your credit report before you apply for a mortgage to see if there is any information that needs to be updated or changed.
- Check your credit score to get an idea of how lenders will see you when they look at the information.
What do mortgage lenders want to know?
Since 2014, mortgage affordability regulations mean that it’s now not just about how much you earn, but also what you spend and an idea of any expenditure you might have in the future. Mortgage lenders will want to know about your outgoings, which includes credit repayments but also utility bills and other fixed regular costs like childcare, school fees, gym membership, season tickets etc.
The aim is to make sure that the lenders can see you will be able to afford your monthly mortgage payments in any circumstance. For example, if interest rates go up, you lost your job, or your family circumstances were to change. Mortgage lenders are more likely to approve your application if they can see you are able to make monthly repayments on time and keep your overall debt under control.
How do mortgage lenders make their decision?
Not all lenders are the same and some have different requirements, but whatever the case, when you make your mortgage application, they will look at
- Your credit report
- Your application form
- Public record information (such as CCJs)
They will put that all together and give you a credit score of their own. The higher your credit score, the better your chances are of getting a mortgage, and one with much better interest rates.