How to get a mortgage
If you’re applying for a mortgage for the first time, it’s not always easy to know exactly where to begin.
Here’s our step-by-step guide to getting a mortgage.
You can’t start looking for your new home until you know how much you can afford to spend on your mortgage each month.
Sit down with your bank statement and look at what you have coming in and going out of your account every month, so you have an idea of all your current financial commitments.
The actual amount you’ll be able to borrow will depend on the lender you go to, as they often have different criteria, but our calculator can give you an idea of how big a mortgage you might be able to get based on your income.
2. Check your credit history
When you apply for a mortgage, lenders will want to see that you’ve managed any debt you’ve had in the past responsibly.
They’ll do this by getting a copy of your credit report from one of the credit reference agencies such as CallCredit, Experian or Equifax.
It’s a good idea to have a look at your credit history before you submit your mortgage application to see if there are any issues which might affect your chances of being accepted.
For example, if you’ve got any credit card accounts you no longer use, shut them down, as keeping them open can negatively impact on your score. Even simple things, such as not being on the electoral roll, can also damage your rating.
3. How big is your deposit?
The amount you can afford to put down as a deposit will affect which mortgages you can apply for.
You’ll need a minimum of 5% of the property value to qualify for a mortgage. Remember that you’ll have other costs, such as stamp duty and conveyancing fees, to cover too.
The bigger the deposit you can save, the wider the choice of mortgages you’ll be eligible for. You’ll also benefit from better rates, so try to save up as much as possible.
If you’re a first-time buyer finding it difficult to save a big deposit, there are schemes available to help. For example, the Help to Buy equity scheme, allows you to borrow up to 20% of the value of a new-build home interest-free for the first five years, or 40% if you’re buying in London.
Here at L&C we can explain which schemes you might be eligible for, and how to apply.
4. Get a mortgage agreement in principle
Before you submit a full mortgage application, it’s often a good idea to request a ‘decision in principle’ or ‘agreement in principle’ from a lender. This will give you a clearer idea of how big a mortgage they may be prepared to offer you.
To get this type of agreement, you’ll need to supply some basic information, such as your income and how much you want to borrow. The lender will then usually contact a credit reference agency to conduct a credit search on you.
Remember that a mortgage agreement in principle is not a guarantee that you will definitely be offered a mortgage, but it can help show sellers that you’re serious about buying.
5. What kind of mortgage do you want?
Before you submit a formal mortgage application, you’ll need to think carefully about exactly what sort of deal you want.
If knowing that your monthly payments won’t change when interest rates rise is a priority, then a fixed rate mortgage may be right for you. If, however, you’re looking for a mortgage which allows you to make big overpayments, you may prefer a more flexible deal.
A mortgage broker can talk you through all the available options to help you work out which is the best deal to suit your individual circumstances. They can also help guide you through the application process from start to finish.
6. Prepare your paperwork
Getting all the necessary paperwork together can help speed up your mortgage application.
Lenders will want to see proof of your income as well as your outgoings, including things like childcare costs and utility bills.
You’ll therefore need to get things like recent payslips together, or your annual accounts if you’re self-employed, as well as bank statements detailing your monthly spending.
Lenders will also want to see proof of who you are and where you live, so you’ll need to produce both photo ID such as passport or driving license, and recent utility or council tax bills showing your address.
Remember, if you’re not sure about any part of the mortgage process, get professional help.
Our mortgage advisers know that getting a mortgage isn’t always straightforward, so they can answer any questions you have and help you find the mortgage that suits you best.