So, you’re hoping to get yourself onto the property ladder and are on your way to saving a deposit. But are you actually ‘mortgage ready’?
In order to be accepted for a mortgage, there is much more to it than simply having a deposit. There are many factors which come into play to assess the actual affordability.
Here are our top tips for making sure you will be mortgage ready!
Credit Report
The first thing to do would be to have a look at your credit report. There are many companies that you can use for this including Check My File, Experian, Equifax etc. If there are any issues or errors that need to be fixed, they will show up on your credit report. This would include issues such as late or missed payments. Sometimes, there can be records of missed payments which you aren’t aware of.
Electoral Role
If you are not already on the electoral role, you should get yourself on there. This will make a huge difference to your overall credit score and gives the lender some assurances that you live where you say you do.
Direct Debits
It is very important to make sure that all of your direct debit payments are made on time, as missed payments can have a significant negative impact. They may not affect your credit score but missed payments on your bank statements can be cause for concern for a new lender.
Streamline your finances
Do you have payments going out for things you don’t really need? Are you paying for a subscription for something, such as the gym, that you don’t actually use? Now is a good time to get rid of anything that is not necessary. All extra outgoings will be taken into account when a lender is assessing your affordability.
Gambling
If you have a little flutter every now and then, that is no big deal. However, if your bank statements show gambling on a regular basis, lenders will not see this in a positive light. If you feel you may have an issue with gambling, help can be found at https://www.gamstop.co.uk
Evidence of income
You will be required to provide proof of income, which will typically be 3 months’ payslips if you are an employee. If you are a contractor, CIS or self-employed other evidence will be required such as your tax computations or company accounts. It is important to have your accounts all up to date.
Decision in Principal
Before making an offer on a property, make sure you have a valid ‘Decision in Principal’ or ‘Agreement in Principal’ from the mortgage lender. This will show how much the lender could be willing to offer, although it is not 100% accurate and the full offer of a mortgage depends on a lot more information and checks than are needed for a DIP/AIP. However, it is a good measure to use when looking at properties to make sure you aren’t offering on a house that you may not be able to afford. As mentioned before, just because you have the deposit for a certain amount, it doesn’t mean you will be accepted on affordability for that amount.
Deposit
This is of course a big deal. Many people do struggle to save, but there are many ways you can help yourself to get some extra cash in the pot. Have a read through our previous article about our top tips on saving for a deposit – https://guildmortgages.co.uk/2021/09/19/our-top-10-tips-for-saving-for-a-deposit/
Register with Estate Agents
Once you are at the stage of having a deposit saved, and have a DIP/AIP, you will be ready to start looking for a property. At this stage it is worth actually registering with Estate Agents rather than just looking online at Rightmove or other such sites. Not all properties go onto these websites, and some sell before there is even time to advertise them. So, your best bet is to register directly with local Estate Agents.
Be flexible!
We all have an idea in our heads of exactly what we want when we start looking for a new home. However, the housing market is moving incredibly fast at the present time and properties will not be available for long. Being flexible is incredibly important. Decide what you MUST have, such as if you NEED a parking space, or room for a home office. Maybe you would like a spare bedroom, but if you don’t really need it, it would be worth considering smaller properties. If you go in with a whole list of things you want and you aren’t willing to compromise, you will essentially be resigning yourself to a very long and painful search. Keep your options open!
If you are unsure of anything or would like some more advice, please do contact us.