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2 min read
One of the biggest steps when buying a property is getting approved for a mortgage. Before you dive into a full mortgage application it might be useful to understand what lenders are looking at in your application.
Lenders will want to see what you earn, so your salary is the starting point. If you’ve got a second job, do freelance work or receive any bonuses, that could count too. Whether you're in full time employment, part time or self-employed, lenders will ask for evidence to show how much money you have coming in.
There are lots of different income types that are considered so it’s best to speak to a mortgage adviser as everyone’s personal situation is different.
Lenders will also look at your outgoings – how much you're spending and on what. That'll include everything from rent and bills to subscriptions, loans and credit cards. Lenders want to check that you're not stretched too thin and that there is enough room in your budget to afford the monthly mortgage payments.
Try and plan ahead to get your budget in a good place before you apply.
This can sound scarier than it is. Your credit score is an indicator of how well you've managed your money – things like paying bills on time, staying within your overdraft limits and managing any debts. Different credit reference agencies like Experian, Equifax and Trans Union will give you different scores – you don’t just have one. It’s worth researching your score and anything that might affect if before you apply for a mortgage. This will give you time to fix anything that isn’t right or build up a higher score.
Don’t worry if it’s not spotless or the highest score – lenders will look at the full picture and not just one number.
You usually need at least 5% of the property’s value as a deposit, but if you can save more you might get access to better mortgage deals. For lenders, a bigger deposit generally means lower risk for them to lend you money.
This is important because lenders view some properties as riskier than others. Flats above shops, quirky buildings and new builds can be seen as more risky by some lenders.
To make sure the mortgage is right for you and the lender they need to consider what would happen in the future if interest rates rise and your monthly mortgage payments increase. It’s important for the lender to be comfortable you can afford the mortgage now and in the future.
In the end lenders just want to make sure you are ready to take on a big commitment of a mortgage and that your finances can manage the payments now and in the future. Don’t worry you don’t have to figure this out alone you can speak to a mortgage adviser to help you through the process.
