Wondering if you will be able to get a mortgage?
The home-buying process is one that can be long-winded, stressful and challenging, especially for first-time buyers.
First, though, you will want to make sure that you are able to qualify for a mortgage ensuring your eligibility to borrow the money needed to get your foot onto the property ladder.
Do I Need Substantial Savings?
One of the hardest parts of buying a home is saving up for a deposit.
The size of the deposit that you need is calculated as a percentage of the value of the property that you are buying.
The minimum amount is usually 5%, but you will get more favourable terms with your mortgage if you put down a larger deposit.
A 20% deposit will get you attractive mortgages, so you want to save as much as possible and consider your options in terms of properties.
Many people investigate various saving strategies through accounts such as ISA’s that yield generous interest rates to help with the process of saving for a deposit.
Income & Employment Verification
Lenders will want to know that you will be able to make repayments, so you need to be able to verify your income and employment information.
This is achieved by submitting pay slips, tax returns and references.
It can be trickier if you are self-employed and you will need to provide two or more years of certified accounts, tax year overviews and bank statements.
Credit Score & History
It is also important that you can demonstrate that you are a reliable borrower.
This is achieved by looking at your credit score, which will inform lenders if it is likely that you will be able to repay the debt.
A good score will help you to get approved and could help you to get a better rate, so you want to give your score a boost. There are a few ways to do this, such as:
- Checking for errors
- Registering to vote
- Paying bills on time
- Ending financial links to people with a low score
- Using low credit utilization
Debt-to-Income Ratio
Your debt-to-income ratio will also be looked at and determine the type of mortgage that you can get.
Essentially, this is the percentage of your pre-tax income that goes towards debt and other financial commitments that you have (mortgages, rent, student loans, credit card debt etc.)
Mortgage Application & Approval Process
The actual process of applying for a mortgage and getting approved can be complex.
This is why it is recommended that you use a mortgage broker who will also be able to find the best deals for you based on your situation.
Hopefully, the information in this post will be useful and help you to feel more confident about the mortgage application process.