If you’re dreaming of getting a foot onto the property ladder, there are a number of things you can do to get yourself mortgage-ready before the house hunting starts.
Get a savings habit
Having savings is essential for getting a mortgage and the more you can save the better. Although mortgages are available with just a 5% or 10% deposit, a bigger deposit may get you a lower mortgage rate or make it easier for you to get a mortgage.
Give your finances a workout
Before making a mortgage offer, a lender will look at your savings, spending habits and credit rating to determine how much it would be prepared to lend you. Check out your credit rating score and make sure it’s in order by dealing with any unpaid bills, removing links from previous partner’s credit rating and closing bank accounts and credit cards that you no longer use.
You can improve your financial health by paying all your bills on time, ditching any unnecessary standing orders, cutting your spending where you can and not using your overdraft. A lender will look at your bank statements and pay slips when it assesses your mortgage application.
Check out Government support schemes
There are a number of Government schemes that can help you get on the property ladder. The Lifetime Individual Savings Account (LISA) enables you to receive a bonus on your savings when you use them to buy a home.
The affordable homeownership schemes provide financial help with the cost of a new build home or shared ownership.
You’re now ready to start house hunting!
When you’ve found your dream property, put an offer to the vendor and had it accepted, you will need to secure the finances to complete the purchase. This will usually involve getting a mortgage.
It’s useful to understand the different types of mortgages that lenders provide – here’s a helpful guide.
Some people find that applying for and getting a mortgage can be stressful. However, by knowing what the mortgage application process involves, you can ensure that it is both relatively easy and that you get the best mortgage for your specific needs.
The first thing that you have to decide is where you are going to get your mortgage from.
You can apply for a mortgage direct to a building society, or other type of lender, or, alternatively, use a regulated mortgage broker to help you.
The application process
Your building society will require information from you on both your (and anyone you are applying with) financial situation and information about the property that you are buying.
The information they require may appear complex and intrusive. However, they want that information to enable them to recommend a mortgage that is suitable for you and that you are able to afford, and that the property is suitable for the loan that is being considered against it.
You will be asked for information on your salary, and you may be asked for your employer’s details so that your salary can be verified. You will usually be required to provide pay slips going back a number of months. If you are self-employed, then the building society would usually want to see your accounts from recent years.
You will also need to provide details of any other outstanding credit you have, and your lender will usually want to see your bank statements for a period as well. They will also probably expect you to detail your monthly expenditure.
All this information will be used to determine if you can afford the loan that you have applied for. Don’t be tempted to give false information – the information you provide will be checked, and giving false information will not just prejudice your current application, it will prevent you getting any further credit (not just a future mortgage, but any other type of loan). Also, as providing false information on a mortgage application is a criminal act, it could also see you appearing in court and getting a criminal record as well.
Once your building society has all your details they will assess your application. Assuming that everything is in order it will then issue you with a mortgage agreement in principle.
The mortgage valuation
Once the mortgage agreement in principle has been confirmed, your building society will arrange for a valuation survey to be carried out on the property you are buying. The purpose of this is to ensure that the property is suitable to act as a guarantee for the loan that you are taking out.
It is important to remember that the purpose of the survey is to confirm the value of the property. It will give no indication of the condition of the property – if you want to know more about the condition of the property you need to ensure that you also have a structural (or scheme 2) survey taken out. The surveyor who carries out the valuation survey may be able to do this at the same time, so if you want a structural survey you should discuss this with your lender or surveyor.
The mortgage offer
Once the basic valuation has been completed, assuming the value of the property meets your lender’s requirements, a mortgage offer will be sent to you and your solicitor.
The mortgage offer contains information such as the address of the property, the purchase price, the mortgage amount and special terms and conditions. If your mortgage is being guaranteed by someone else, it will also include their details.