This time last year, we were in the final throes of buying a property. Bristol has a pretty competitive housing market and buying this house came down to having our finances lined up. We had to demonstrate that we had the deposit and a mortgage offer, sometimes called ‘a decision in principle’, before our offer was accepted,
A mortgage offer lasts between 3 and 6 months depending on the lender and the market, because mortgage rates go up and down. Obviously, finding the right home doesn’t take a neat 3 months. So you may have to get the offer renewed. There are various on-line calculators, we found that sitting down with someone from the bank and discussing rates and finances gave us a much clearer picture of how much we could afford.
Last year mortgage regulations changed, lenders are now under obligation for ask more questions about your personal expenditure, a mortgage offer is not just based on income and a lender needs to be confident that you can continue to afford your mortgage should interest rates and therefore the costs of repayments rise, this is a significant because interest rates are at an all time low.
Our experience of applying for a mortgage involved a lengthy interview (expect around 2 hours) and a complete review of how we spent our money. Buying a property is a huge financial commitment. There are numerous costs involved, all of which must be budgeted for.
Top Tips before you apply for a Mortgage
These are my top tips for doing the ground work before you apply for a mortgage, it is not a definitive guide, just useful tips, based on our experience and things we were unaware of.
Get on the electoral register
Lenders will do a back ground check, called a credit check. To combat fraud, they will need confirmation that you live where you say you do. Being on the electoral register confirms how long you’ve lived at an address and what addresses you may have previously lived at.
Dump any old credit cards and check addresses
I had an ‘emergency’ credit card, which I rarely used. Unused cards are still ‘active’ as far as credit card companies are concerned. Forgotten or ‘parked’ cards, perhaps registered at an old address can cause problems, in terms of ID checks; the information won’t match up. They also represent a possible place to rack up debt. I decided to close my emergency card, to simplify my finances. Ensure all your address information is up to date on everything financially linked. It is so easy when you pay by direct debit and get bills on-line to forget to update addresses.
Check your financial history
A lender will run a credit check, we decided to get a credit report first, previously, my partner had lived aboard, the bills in our old property had been in my name. He’d had an issue with his bank making an errors and we wanted to make sure that hadn’t ended up on a credit report. To find out more about our credit rating, we used Experian, they gave useful advice over the phone and provided us with a detailed credit record, which we received a few days later. Our credit was in good shape. However, if it wasn’t we would have been fore-warned and could have looked at ways of amending or improving it.
Loans and Credit Cards
Repay any loans, credit cards or consider consolidating your loans/credit cards. Consolidating your loans can reduce repayments, but also helps you to manage your money. One loan or credit card rather than several. Demonstrates to a mortgage lender that you can effectively manage your money, you don’t have a mishmash of repayments, scattered across different cards and loans.
Review all your monthly out-goings
Our mortgage lender asked about gym and club membership. Know how much you pay before the meeting. Consider all your monthly outgoings and how much you might be able to trim back in order to afford the perfect property. That gym membership you pay for but never get around to going to.
Know what all your monthly outgoings are. Not just utilities and credit cards. Consider how much you spend on petrol, at the supermarket, socialising, the gym. Know what your exactly what your expenditure is will save time and give you confidence. Sit down with a mortgage lender knowing how much you can afford, rather than have someone else spell it ouy for you.
A good lender will show you different types of mortgages and repayment lengths to fit your individual circumstances.
It’s up to you find that dream home!