Preparing to apply for a mortgage

Not many people are in a fortunate enough position to be able to buy a home outright, so applying for a mortgage is your first step to becoming a property owner.

Yet being accepted for a mortgage isn’t just as simple as visiting a lender and letting them know how much you earn. There’s a lot more to it than that these days, so we’ve put this guide together to help improve your chances of being accepted for a mortgage and what processes you’ll need to go through.

Be prepared

Before offering you a mortgage, a lender is required to go through a full affordability assessment to make sure that you can comfortably afford to pay back their money,

Before you speak to a lender or adviser, prepare a breakdown of your finances. List your income, along with all your regular expenditure – including everything that you’d class as essential outgoings. This could cover things such as groceries but also car finance payments, credit card bills or childcare costs.   Your lender may also ask you about non-essential spending too – the things that might be classed as treats, such as haircuts, social activities etc so it will help to have a realistic idea of the amount of money that you spend on this per month/year.

Make sure you have enough deposit

Saving enough money for a deposit can be the first hurdle that many first time buyers fail to cross.

There are some affordable housing schemes available to first time buyers that will allow you to put down a small deposit of 5%, but for most standard mortgages a first-time buyer will typically have to have saved at least 10% of the property value as a minimum.

If you are able to offer a larger deposit – up to 40% will give you much more equity in your home, and you should see the interest rate you pay drop significantly.

If you’re starting to look at property but haven’t even thought about where your deposit is going to come from, you may need to put your plans on hold a little longer until you have saved enough.

The earlier you can start saving for a deposit the better – shop around to look for an account that offers you a good rate of interest or a savings bonus to make sure you are getting the best return on your savings.

Compare savings accounts

Check your credit rating

It’s important for the lender to know that you are a responsible borrower so if you have a poor credit history, such as late or missed payments on credit cards, or outstanding debts that haven’t been paid, then alarm bells will begin to ring and it may cause you to be declined for a mortgage.

Everyone has a legal right to request a copy of their credit report so it may be worth checking yours out before you apply for a mortgage, to make sure it’s all in order.

You can find out how to check your credit report in our guide below.

Guide to checking your credit report

Clean up your report

When you check your report you’ll see previous credit transactions that you’ve made such as prior loan applications or credit card agreements. If you see anything on your report that you don’t recognise then contact the credit reference agency as soon as possible – this might be a sign that you’ve been a victim of identity fraud. If there are items on your report that haven’t been made by you, you can request to have these removed.

There are ways you can improve your credit rating if you are worried.

Make sure you are registered on the electoral roll with your local council – lenders will want to verify your address and make sure you are who you say you are.

If you do have a bad credit history, then you’ll want to improve this before applying for a mortgage – having a mortgage or loan declined could just make things worse. Building up small amounts of credit over a few months with a credit-builder credit card or similar – and making sure that you pay it off regularly and on time will show a potential lender that you can be a responsible borrower.

Be nice to your mum and dad

In an ideal world, you’d be totally independent and not have to rely on someone else’s finances, however not everyone is fortunate enough to be able to secure a mortgage by themselves, or even with a partner or friend. Many first-time buyers have struggled without their parents or another family member offering them help with a deposit, or even acting as guarantor on their mortgage.

Having someone act as a guarantor may help you to secure a mortgage in the event of you having a small deposit, or an adverse credit history however it’s certainly not an agreement you should enter into lightly.

A mortgage is a huge financial commitment and as guarantor your parents would be liable for the remaining debt if you were unable to make your regular payments.

Compare Deals

Knowing what mortgages are on offer will help you to decide what it is you’re after. You can search the deals based on the value of your mortgage – just pop the details into the calculator and you’ll be able to compare interest rates, arrangement fees and get an estimate of how much you’re likely to pay each month.

Mortgage Calculator

Speak to a mortgage adviser

Mortgages are a huge financial commitment and often for first-time buyers the amount of mortgages on offer can be confusing to say the least.

If you’d prefer to seek guidance on the type of mortgage that is going to be the best one for you, then it may help to speak to a mortgage adviser.

Mortgage brokers and advisers know the mortgage market like the back of their hand – they can give you the help you need to make your application successful. Not only do they have access to a number of exclusive broker-only deals that aren’t available from the high street lenders, they can match you to the most suitable mortgages depending on your individual circumstances.

You aren’t under any obligation to use a mortgage broker, but just seeking a little advice can prove invaluable in the search for the right mortgage. If you do decide to use their services to complete your mortgage application, make sure you know what the charges are. Many brokers offer a completely free service to their customers and will claim commission from the lender once a product is sold, however some brokers may charge a client fee too. When you speak with them initially they should be upfront about how they make their money in order for you to make an informed decision.

Seek further mortgage advice