Getting a mortgage is something that many people dream about. They like the idea that they can have the freedom of owning their own home with no rent to pay and also have an investment which will gain in value. It also tends to be cheaper to own a home rather than rent one, which can be a big part of the appeal as well. However, to buy a home most people need mortgage and this can be a difficult thing to get.
For most mortgages you will need a deposit. This means that you will have a lump sum of money that you will pay towards the cost of the home that you are buying and the lender will give you the rest. The amount needed can vary but it tends to be around 10% of the value and so the dearer the home you want; the higher the deposit. Saving for the mortgage tends to be most people’s focus when they are thinking about buying a home. Although this is one very important factor and needs to be done, there are other things that can be done as well.
You will need to have a good credit record in order to borrow the money. This will partly be determined by your income but also by your ability to pay things on time. If you have your name on any utility bills, bank accounts or loans, these will be noted on your credit record and if you pay them on time, do not borrow too much and make repayments when needed then this will be noted and work in your favour.
Having a job will make a big difference with regards to your mortgage application. You will need to be able to show that you are capable of making the repayments and therefore will need to be in a permanent job and have been there for at least three months. This will show that you are capable of holding down a job and that you will be able to have enough income to pay the required repayments each month. Obviously the amount that you earn will be relevant as well. It will also be harder to get a mortgage if you are self-employed compared to if you are employed.
Having debts could have a negative impact on your application. You may be saving hard for a deposit, but it could be better to be using that money to repay your debts. Find out form the lender you want to go with or from a financial advisor as to whether you will need to pay off the debt before you will be considered for a mortgage. It will probably depend on how much it is and how long it has been outstanding for as well as what type of debt it is. You are unlikely to be penalised for a student loan, but a large credit card debt could be frowned upon, for example.
The amount of mortgage that you are allowed is determined by the income of the potential home owners. This means that the more you can earn, the better as even if you do not want a big income, if you can show you are well equipped to make the repayments, this will help. Therefore it is a good idea to do what you can in order to maximise your income. This may mean changing jobs, which will then delay you getting a mortgage for three months, but it could mean that you are far more likely to get a mortgage and it will give you longer to save up for a deposit. Alternatively, you could see what you can do to get a pay rise so that you do not have to wait for three months before applying. Find out how the pay rise system works in the company that you work for and see whether there is anything that you can or need to do in order to secure one.
Before you apply for a mortgage it can be wise to find out what the lender is looking for in a successful applicant. Find out, if you can, from their customer services, what checks they do. Then you will be able to make sure that you fulfil their criteria and if you do not, see if you can make improvements so that you do.
For those people in situations where they do not have a permanent job or are nowhere near saving up the required deposit, it could be worth looking at a guarantor mortgage. These are gaining in popularity and you can ask a parent or grandparent to put some security forward, such as a sum of money or their home, as a guarantee so if you miss a mortgage payment they will be responsible for it.