Getting a mortgage lender

How much you can borrow will depend on how the mortgage lenders will rate you. In general, the more you are rated as a riskier applicant, the more you will have to pay on the interests.

So it is in your best interest to show the mortgage lender that you are a good bet for a home loan. The more attractive you seem, the better deal you will get.
There are few ways to help you achieve this:

Deposit

The size of your deposit is the biggest factor in getting a good deal nowadays.

Some lenders now offer mortgages at 95% loan to value, which means you only need a 5% deposit.

Rates will be lower if you can put down more cash upfront. For example, putting down a 25% deposit means  your rate will be around 4% for the first three years.

Putting a 15% deposit means your rate will be around 5%, and putting down a 10% deposit means your rate will be around 6%.

This could make a huge different in your monthly costs.

So when planning to buy your home, it may be worthwhile taking extra time to build a larger deposit.

Remember that there are other costs involved in buying a property, and lenders will also want to check how you plan to pay for those.

Credit record

When you apply for a mortgage, the lender will access your credit record.  This is a listing of your financial history, normally over the last 6 years.

It will tell the lender what other credit accounts you have, and whether you can run those account sensibly.

Some lenders will credit score you. This is literally a score, the higher the score the less of a risk you are to them. Your score will be based on many factors, including your credit history.

Its well worth getting a copy of your credit report to make sure that it is accurate. You can do this by contacting one of two main agencies, Equifax and Experian.

For a small fee of £2, they will send you a copy of your credit record, and if there any inaccuracies, you can ask them to investigate.

There are steps you can take to improve your score. Firstly, make sure that you are on the electoral roll, as this will make it easier for agencies to recognise where you live.

You should also close any credit accounts that you do not use. There will be other tasks that the agency can point out to you to help you up your ranking.

Other borrowing

Most lenders now work out how much you can borrow based on an affordability calculation. So in addition to looking at your salary, they will also examine any other commitments you may have.

Having any other loans or financial commitments will mean you can borrow less. So it always a good idea to pay off any outstanding loans and debts whenever possible before seeing a lender.

Ideally, you would want a large deposit and no debts. But sometime your circumstances doesn’t allow this and you will have to make the choice of whether to pay off your debt and a small deposit, or have a large deposit but with other debts lingering in the background.

Employment

Lenders like to see a stable financial history, and part of that comes from steady employment. You will likely need to prove you have been in your current employment for at least three months.

So if you are planning on changing jobs, it will be worth waiting until the mortgage is completed.

Get a guarantor

If the amount you want to borrow is out of reach, some lenders will let you enlist the support of others to help you get the mortgage.

A Guarantor Mortgage is when you have a family or a friend take a mortgage out with you. Both parties will be liable for repayments on the mortgage. If you stop paying, your guarantor will be chase for the debt owed.

Having a guarantor means that the lenders will feel more comfortable borrowing to you. Then once you are able to afford the repayments alone, maybe because your salary rises, the guarantor’s name can be take off the mortgage, and the repayments will fall only to you.

Honesty is the key

It is advisable that you are upfront and honest about the information you give to a lender when make your application. Lenders wants to lend, but they also want to make sure that person can comfortably afford the loan, and not struggle with repayments.

Falsifying information or documents in support of a mortgage application is a crime, and even if you don’t get prosecuted, you will definitely find it difficult to get another loan if you are caught.