One of the first steps to owning a property is to secure yourself a mortgage unless you are a cash buyer. However, all mortgage lenders will have a set of requirements that you will need to meet if you are ever to get a mortgage.
Understandably, mortgage lenders don't just let anyone borrow money, so they will check all applicants against a set of criteria before giving borrowers what they want.
Mortgage lenders will also assess how much they are prepared to lend the borrower, so you should never assume that you will be offered the total amount of money you need.
Bearing all this in mind, let's take a look at some factors that will affect your chance of getting a mortgage.
Your credit score
It is a good idea to check your credit score before you apply for a mortgage. It will be more difficult for you to secure a mortgage if you have a bad credit score. The mortgage lender will be looking for things on your credit history, such as missed payments and CCJs (County Court Judgements), that will have an impact on your application.
If you have a poor credit score, it will be worth waiting a year and spending that time building your credit score back up. You can do this by making sure all of your credit payments are made on time. CCJs will no longer show on your credit report after six years.
There are many people who are turned down for a mortgage because they don't have any credit history. While it can be great not to have any credit and not owe money to anyone, a mortgage company will use your credit history to check that you are good at paying back credit.
It would work in your favour to get a credit building card to help start building yourself a credit history. You should also register yourself on the electoral roll if you haven't already. It is more challenging to get a mortgage if you are not registered on the electoral roll.
Shop around lenders
You will find that each mortgage lender will have a different set of criteria for accepting or rejecting an applicant. This means that if you are turned down by the first lender you try, it doesn't mean that you will be rejected by every lender you approach.
It is possible to find a mortgage lender with an acceptance criterion that is more favourable to your situation. If you feel a bit overwhelmed about your search, then a mortgage broker may help you find the right type of lender to meet your needs.
A broker will have a list of lenders they work with that will accept applicants with bad credit or no credit history and can be an option if you get turned down by the leading high-street lenders.
A mortgage lender will review your income to determine if a mortgage is an affordable option for you. No lender will grant you a mortgage with repayments that you will struggle to reach each month.
Having a low income doesn't necessarily mean that you will be rejected for a mortgage, but it may determine how much the mortgage lender is prepared to offer you. They will also take into consideration your outgoings. Your mortgage repayment must be affordable on top of your monthly expenditure on things like household bills, mobile phone, car expenses, credit card payments, etc.
If you are on a low wage, it can help to do a spring clean of your finances and minimise your outgoing payments as much as possible. This will help to work in your favour when you make your mortgage application.
For example, if you have car payments, credit card, or a personal loan that is nearly paid off, it can pay to wait until you have cleared these loans before applying for a mortgage. Doing this can mean you are able to apply for a higher mortgage amount.
Check out mortgage schemes
For many people that struggle to get an entire mortgage, especially if they are on a low income, there are other opportunities to get on the property ladder through schemes such as Help to Buy or shared ownership.
The Help to Buy equity loan scheme was introduced by the UK government. The scheme helps first-time buyers and existing homeowners to purchase a new build property. You can borrow 20% of the purchase price of the property interest-free for five years. Buyers must be able to place a 5% deposit to qualify.
Shared ownership allows you to buy a share of a property from a housing association that owns the rest of it. You will pay a mortgage on your share of the property and then pay rent on the rest to the housing association.
Shared ownership is ideal for first-time buyers and previous homeowners that can no longer afford to buy a property on the open market. Shared ownership can be from 25 – 75% of the property.
If you have been saving up a deposit for a new home, the larger the deposit you have, the better the mortgage terms you will be offered. If you can put down a substantial deposit on a new home, you may benefit from lower interest rates.
We hope this information has helped you with your preparation for a mortgage application. If you need further help, do not hesitate to contact our friendly team here!