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How do you get a mortgage?
30 April 2018
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If you’re looking to buy a new home, there are a few steps that you’ll need to take to get a mortgage.
Clean up your credit score
When you apply for a mortgage, the lenders will look at your credit score as part of their assessment to decide whether they will lend to you and how much. You can request a copy of your credit file from companies like Experian and identify if there are any areas that need to be cleaned up. You can boost your score by making sure you’re registered on the electoral roll and don’t have old credit cards and store cards open that you no longer use.
You can also improve your credit score by having regular direct debit payments in your name, for things like mobile phone contracts, utility bills, etc. It’s also advisable to spend a small amount of money on your credit card each month and paying off the full amount when the statement arrives. This shows the lender that you’re reliable when it comes to making regular payments, reducing the risk of lending to you.
If you have large amounts of debt, whether they’re short term (credit cards) or long term (loans), this will bring your credit score down. It is worth trying to pay as much of these off as possible before applying for a mortgage to improve your chances of approval.
Save a healthy deposit
Having a good-sized deposit saved before applying for a mortgage will improve your chances of approval and mean you could access better interest rates. If you can save at least 10% of the cost of the home you’re buying, and have a good credit rating, you’re likely to have access to reasonable mortgage deals.
By saving 20-40% of your new home’s value, you’ll be able to access better interest rates and have a wider variety of lenders to choose from. This will also have a positive impact on your mortgage application if your credit score isn’t great and/or you are self-employed. Larger deposits mean you’re borrowing less money, which equals less risk for the lender. Read our tips for saving a deposit
Open a help-to-buy ISA
If you’re a first-time buyer, then you could get a 25% bonus on savings of up to £12,000 if you’re using this money to buy a home. The Help to Buy ISA allows you to deposit £1200 in the month of opening and up to £200 per month after that. If you’re buying with another first-time buyer, they can also open their own separate account, meaning you could claim up to £6,000 of government bonus. Find out more about the Help to Buy ISA
Decide if you want to use Help-to-Buy
The government’s Help to Buy scheme is available to buyers of new build properties until the end of 2020. You can apply for a 20% loan from the government, which is interest free for the first five years. This means you will only need a 75% mortgage and as little as 5% deposit to buy your new home. Find out more about Help to Buy
Avoid switching employers before applying
Lenders see a long period of employment at the same company as a sign of income security. So if you’re considering a new career move, it’s worth waiting until your mortgage application has gone through.
If you’ve already started a new job and are looking to get a mortgage, it’s best to wait until you’ve been in the job for at least three to six months before applying as this is the typical probation period.
Make sure you have proof of income
If you’re in full-time, regular employment with a company then you should make sure you’ve saved at least three month’s payslips to show to the mortgage lenders as proof of income. If you’re self-employed or don’t have a regular weekly/monthly income, you will need to have at least three years of tax returns showing how much you earned.
Speak to a mortgage advisor
Mortgage advisors work with lenders and assess the mortgage market daily, so they’re experts in assessing your financial profile and situation to find the best deal for you. That’s why it’s worth speaking to one when it comes to applying for your mortgage.
They can advise you when it comes to preparing your finances for the mortgage application and guide you as to which lenders would best suit your needs. They also have access to exclusive deals that are only available when taken through them, as they have working relationships with various lenders.
If you’re buying a new home with Strata, you’ll get access to our panel of recommended mortgage advisors as part of the buying process. Find out more
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