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Put simply, a mortgage is a loan which allows you to buy property. The term of a mortgage can vary but the average length is 25 years. The loan will be secured against your house or property; if you don’t keep up repayments your house could be repossessed by the lender, so it’s important to make sure you can afford afford a mortgage before taking one on.
Here are six steps you should consider taking before applying for a mortgage:
Save up a deposit
In order to get a mortgage, you’ll need a deposit to put down. The bigger deposit you’re able to save up, the better the deal you’re likely to be able to get on your mortgage. Whilst it is possible to secure a mortgage with only a 5% deposit, your monthly repayments and total interest paid will likely be lower with a bigger deposit. You can get help saving a deposit using the Government Help to Buy Scheme.
If you haven’t started saving, or are not already keeping track, the best thing to do is create a budget. Keeping track of your income and your outgoings will help to identify areas in which you could save money, and show you how much you could be saving. It can also help you work out how much you’d be able to afford in terms of monthly mortgage repayments.
Check your credit score and improve if necessary
When it comes to getting a mortgage, your credit score matters. It’s worth getting hold of your credit record to see what your score is, and also to check all the details are correct. There are 3 main companies that can provide you with your credit score – Experian, CallCredit and Equifax.
If your score is low, it may affect your chances of getting a mortgage, so try to improve it if possible. You can increase your credit score by making sure you’re on the electoral roll, reducing or clearing any existing debt, making payments on time and checking your report for any mistakes.
Stay in the same job
A lot of lenders like you to have been employed in the same job for a good amount of time, as it shows you have a reliable income, so if you were thinking of changing job, it’s worthwhile holding off while you’re considering applying for a mortgage.
What if you’re self employed?
If you’re self employed, it’s not quite the same process, and lenders will want to check you’re able to keep up repayments, so you’ll need to provide fairly extensive proof you can do so. Here’s a more specific guide on mortgages for the self employed.
Reduce your debt
Lenders will want to see your existing debt, and this will massively affect how much they are willing to let you borrow. If you already have debts, such as credit cards, it may help to try and reduce these as much as possible before submitting your mortgage application.
Get your documents ready
When you take out a mortgage, you’ll need to show a lot of documents, so it’s helpful to make sure you have all these readily available. You’ll need to show:
- Proof of identity, such as Passport or Driving Licence
- Proof of address, such as utility bills.
- Proof of Income – this will be your wage slips if you’re employed plus bank statements and P60 or your SA302 forms and accounts if you’re self employed.
Some lenders may also require other information, such as household bills, child maintenance payments and more.
Shop around for the best deal
Mortgage deals you can get can vary hugely from provider to provider, so it’s best to shop around to find the best deal for you. If you’re struggling to find a good deal, it’s a good idea to try using a Mortgage Broker – they can search the market to find you the best deal, and also help you out with your application if needed.