Getting on the housing ladder can feel like it takes an eternity. Working out how to save for a house deposit is just one part of the problem. The other? The question of how to get a good mortgage deal.
How long does a lender need to assess your mortgage affordability?
The average mortgage application takes around 2 weeks to be approved - so don’t expect to hear anything within 24 hours! This gives your mortgage lenders enough time to assess your affordability and work out whether you can make your mortgage repayments on time.
Wondering why your mortgage application is taking so long? If you have a weak credit score, this could be a sign that your mortgage lender is doing a more intense check of your credit history. However, it could also be because of a busy housing market and a backup of mortgage applications after lockdown.
There are many factors that can reduce how much lenders are willing to let you borrow for your home, from debt to low annual income. But don’t panic just yet. If you need help preparing for your mortgage application, Peabody New Homes has rounded up 5 of the best ways to improve your affordability!
1. Clear your debts before applying for a mortgage
Dive into a mortgage application when you’re deep in debt, and the amount you can borrow for will suffer. Focus on repaying that loan for your new car, or any outstanding credit card payments. In the meantime, you might need to tighten your belt to present the most appealing bank statements to lenders.
Don’t panic if you can’t clear all your debts completely. When it comes to credit cards and overdrafts, try to keep your debts below 50% of your available credit, ideally 25%. This will give the lender the confidence that you are handling your budget correctly. On the other hand, lower your available credit limits if you do not need it so that lenders don’t assume you might start using all your credit once you get your mortgage approved.
2. Run a credit score check to increase how much you can afford to borrow
You can’t get a good mortgage plan without a good credit score. This is the biggest sign to your mortgage lenders that you are a person they can trust with borrowing their money. Steer clear of anything that will make it difficult for you to repay your monthly bills. There are loads of easy ways that you can boost a weak credit score. Always pay your bills on time, and register to vote so that mortgage lenders know who you are and where you live.
To learn more about what you need to know about your credit score when buying a home, our panel mortgage advisor, SRC Mortgage Solutions gives us a breakdown of the facts around credit scoring and the importance of having 'good credit' when purchasing a home.
3. Use a mortgage broker to find the best deal
You might have used one of the available mortgage affordability calculators out there and got excited. However, there’s a lot more to understand if you want to be successful in securing a mortgage. Instead of browsing the internet for days, you can overcome this hurdle by getting a mortgage broker to help. This service comes with a fee but the extra help could be worth it since these experts can scour the market for the best mortgage plan for your circ*mstances.
Before reaching out to any type of financial advisor, there are tips you should know about to pick the right one for you. You can look at this guide to choosing the best mortgage broker to understand what you should be looking for and the questions you need to ask brokers before working together.
Sort out your finances, with the help of a financial advisor, before sending your mortgage application.
4. Build a money-saving plan to get a bigger deposit
The bigger the deposit, the easier your mortgage will be to repay. You will have to wait longer before buying your dream home, so this option won’t be for impatient homebuyers. However, the long-term results are arguably worth the wait. This is because paying more money upfront will mean you will pay less monthly.
If your financial situation isn’t ideal and you are struggling to save enough for a deposit, why not consider buying through Shared Ownership? This alternative to buying a house outright enables you to purchase a share of the property. You can buy from 25% of the total value meaning the deposit required to get a mortgage can be as low as £6,750.
5. Get your paperwork ready for your mortgage application
From the time you start working, you should get into the habit of saving all important documents into a Google Drive or cloud for easy access. If you haven’t, take the time to gather all your paperwork before reaching out to any lenders. This will make sure you come across as more trustworthy and reliable.
The documents you need for a mortgage application are as follow:
- a valid form of ID
- last three months’ payslips
- last three months’ bank statements going back for at least the last 3 months. This lets your mortgage lender know that you have a stable source of income, making you a perfect candidate for a mortgage loan.
The lender can then assess whether you are a UK taxpayer, have a stable source of income and have reasonable spending habits that will enable you to repay your mortgage on time.
Now that you have all the information you need to take the first steps in increasing your mortgage affordability, don’t hesitate to check out our list of trusted financial experts who can help you even further.
