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Things to do before applying for a mortgage

Tuesday, April 28, 2020

Are you utilising the extra time that comes with being in lockdown to get organised and make plans for buying your first home? Sorting out your mortgage is a hugely important first step to help you do this so it's worth taking your time to get things right.

Check you've done these seven things first and you can feel confident you have put yourself in a good position to proceed. 

1. Address your debt
In the past, mortgage lenders typically used a simple calculation of 3.5 to 4 x a single salary (or around 2.75 x your combined or 'joint' salaries if you were buying together) to work out the amount you could borrow.

But those calculations didn’t take existing debt into account, so they didn't fully reflect how well potential borrowers might be able to afford the repayments.

Since the Mortgage Market Review (MMR) was introduced in 2014, lenders have overlaid the use of these 'income multiples' with tougher affordability rules.

These – rather sensibly – look at what you can afford to repay each month after your expenses and existing debts have been deducted from your monthly pay.

This includes outgoings such as household bills, childcare, school fees, gym memberships and even socialising, as well as credit card payments, overdrafts and loans.

The result? The less debt you have, the more you can borrow. So it's worth getting all your finances into the best possible shape so you improve your chances of getting a good mortgage offer.

That might mean paying off a card balance or a personal loan, or it might mean cutting back on spending in some areas to increase the money you have at your disposal each month.

2. Check your credit score
Your credit score lets lenders know how reliable you are when it comes to borrowing money – and a good credit score is a must if you want a mortgage.

To see where you stand before applying, you can get a copy of your report from an agency such as Experian, Equifax or TransUnion.

The sooner you do this, the better – if there are errors, you can get them corrected and if you have a poor score it will give you the chance to take steps to improve it.

Simple ways to boost your credit score include getting registered on the electoral roll, paying bills on time, keeping within borrowing limits, and closing down any credit accounts you are no longer using.

3. Test the waters
Do this by getting what is known as a mortgage agreement in principle (AIP).

It’s essentially a letter from a bank or building society which indicates the likelihood of your application being accepted and the kind of loan amount you might get, based on an initial assessment of your circumstances. It’s free to obtain.

Typically, an AIP will last between 60 and 90 days. If it expires before you need it, you can always reapply. Note however, an AIP is only an estimate – not a formal mortgage offer. Make sure you ask about extensions to the AIP in case you need a little extra time after lockdown to find your perfect home. 

4. Contact a mortgage broker
While you can now increasingly carry out most of your mortgage application online, as a first-time buyer you might want the reassurance of speaking to an expert over the phone. 

It will compare mortgages across the whole of the market and help find the best deal for your circumstances in terms of rate, fees and the likelihood of your application being accepted.

Brokers can also have access to exclusive deals – known as ‘broker-only’ – which are not available direct from the banks and building societies.

5. Do your own research
Back up the broker’s findings with your own online research online at comparison websites such as This won’t cost you a penny and will ensure you can rest easy in your final decision.

6. Get the paperwork together
Whether it’s digital or hard copy, there's a lot of documents to get your hands on as part of your mortgage application. This includes photo ID and up to six months’ bank statements.

You will also need to be able to demonstrate that you earn a regular income. If you are employed, you can do this easily – by providing your payslips. If you are self-employed, demonstrating your income is a little trickier. You will need to show the lender your business accounts, signed off by an accountant, as well as your tax returns. Work on three years’ worth, although two may be sufficient.

7. Make a final check that you have the best deal
Getting a rate on your mortgage is very important – a few percentage points difference can translate into thousands of pounds a year on such a large loan.

That said, it’s not just about cost. You also need to make the right choice on the type of mortgage, as this can directly impact on your future choices and flexibility.

Crucially, there's no need to feel any loyalty or obligation to the lender that issued your agreement in principle. You are free to scour the whole market both now and again when you eventually come to remortgage. 

Article taken in part from - to read the article in full why not visit their website where you will also find for handy guides and additional information.

Important Information
All property sales and the financial advice that surrounds them are as unique as the people engaging in the transaction. It is important to not make a decision without seeking professional advice. If you want to sell your home and are considering redecorating before marketing, speak to one of our Property Professionals to get the best advice for presenting your home for sale before making any investment. This article is for the purpose of information only and should not be seen as financial advice.



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