Buying a home in the UK can be a rollercoaster of emotions, after all, it is one of the biggest life experiences one can go through. Understanding the application process and all that comes with it is one of the best ways to equip yourself for the ride.
While it may be stressful and right now, fewer of us own our homes than we used to, there are steps you can take to improve your chances of getting onto the property ladder. One of the main takeaways from this article will be your attractiveness to lenders, ensuring that you are financially trustworthy and reliable to pay back the money they lend.
Let’s take a further look into just how to navigate the turbulent world of mortgage approval and the all-important application process.
1. Determine Your Budget and Deposit.
One of the first and most important steps right off the bat is to understand your budget and how much to save for a deposit, which will determine how much you can lend. If you have a property in mind, it’s important to ask yourself how much you will need for the deposit, property bills, moving fees, and essential extras, such as home insurance. Ensuring that you have saved enough to cover these, including a deposit, will determine the LTV (loan-to-value) ratio, which is the proportion of the property’s value you are borrowing. Saving for a larger deposit will lower your LTV, which in the eyes of lenders is favourable as it indicates a lower risk for them. Lenders often offer better terms to borrowers with a lower LTV ratio, including lower interest rates.
2. Understand Your Credit Score.
Next up is the all-important credit score, which lenders use to try and predict your reliability to make repayments. Your credit score is based on your payment history and credit applications over the last 6 months, so you must look closely at your credit score before applying for a mortgage. There are ways you can improve your credit score, such as paying off debt and it’s also important to address any discrepancies as soon as possible. Each lender will look at your credit score differently, but every lender will want to see as high a score as possible.
3. Gather Your Income and Employment History.
Give your lender as much proof of your reliability as possible to give you the best chance of gaining their trust, and getting the deal you want. Lenders will typically ask to see recent pay slips, proof of bonuses or commission, and your latest p60 showing your income and tax paid in the last year. Providing this evidence of income and employment gives the lender assurance that you are reliable and able to repay. If you’re self-employed, it can be a little trickier as you may be asked to show your accounts or an SA302 form from the HMRC for the last 3 years, which unfortunately means that if you have only just decided to go self-employed, the application process can become difficult.
4. Manage Your Debts.
Showing how you can manage your debts as well as not having too much outstanding are both important factors in the mortgage application process. A mortgage is essentially a debt, so adding this to your already outstanding debts is something that lenders want to assess as well as if you are reliable in making timely payments, without maxing out your credit availability. The way lenders assess your affordability is to work out your debt-to-income ratio, which is essentially the proportion of your income allocated to debt repayment. Avoid making too many credit applications in the run-up to your mortgage application, as this can portray a desperate need for cash, which doesn’t send the right message to lenders.
5. Organise Paperwork and Legal and Regulatory Compliance.
The mortgage application process can be lengthy and compliance with legal and regulatory requirements is a non-negotiable for mortgage approval. Ensuring that you have everything filled out correctly on your application, organised, and ready to send can help speed up the process, as well as reduce the need for multiple people needing to review your application and find potential flaws. Lenders are likely to ask to see ID documentation like your passport, proof of address such as a utility bill, and proof of deposits such as a savings account statement. Ensuring that all documentation is in order, including property surveys, legal searches, and insurance arrangements, is essential. Failure to meet these requirements can lead to delays or even the rejection of your mortgage application.
TaylorMade: How an independent Mortgage Advisor can Help.
These are just some of the key factors in the mortgage application process, there is much to it but ensuring that you understand and follow the above points to the best of your ability will stand you in good stead for mortgage approval.
At TaylorMade, we understand just how daunting the mortgage application process can be. We are an independent mortgage broker in Manchester but covering the whole of the UK, whose expert team has years of experience helping those in need of mortgage guidance.
So, whether you're stepping onto the property ladder for the first time, or are looking to remortgage, get in touch today with our friendly, helpful, and knowledgeable team. We are your expert mortgage advisors, waiting to help you today.
