The Mortgage Mum: Get Mortgage-Ready In Six Months
Our superstar Hampshire mortgage mum, Colleen, is back! Another instalment of financial fluency, money milestones and, this time, we’re talking all about getting mortgage ready!
As the world opens back up, the housing market has got its skates on. Whether it’s first-time buyers making that initial leap, or city-dwellers hot-footing it to the suburbs, there’s definitely something happening in the property market.
But rain or shine, boom or bust, there’s always things we can be working on to get ourselves mortgage ready. Particularly for first-time buyers, I picked Colleen’s brain on getting mortgage ready… in just 6 months!
Here are The Mortgage Mum’s top 12 tips!
For most buyers, you’ll need a deposit of 5-10%. It’s best to be on the safe side and over save, in case of unexpected costs.
If you’re lucky enough to be gifted your deposit by your parents, that’s great! You can also take a look at ‘guarantor mortgages’ and other ways parents can help such as the Barclays Springboard mortgage to really maximise any help you might have been offered.
Get your credit file
It’s super important to have total transparency on your credit score and history.
You need to see what lenders are seeing so you are crystal clear on any loans, credit cards and other commitments that might be visible.
Your mortgage eligibility can be totally scuppered by a dodgy credit score, so whilst resources such as Experian or Equifax are useful to check yours they don’t show all of the 3 main providers in 1 place.
[You can get a detailed breakdown of your credit history with CheckMyFile, recommended by Colleen, here.
Clear your credits cards
Before you apply, clear as much off your credit cards as possible.
If you have loans and credit cards, clear the cards first as they usually have a higher interest rate. Simply set up a regular, affordable direct debit payment.
Keep a float in your bank account
To ensure that you don’t get any ‘black marks’ against your credit file, whilst you’re paying off your credit cards etc., ensure that there’s a decent float in your account that can handle all your direct debits and repayments.
Missed payments are very difficult to expunge from your record – try moving all your direct debits to payday to ensure that they can all be fulfilled.
Get your name straight
Ensure that you’re on your local electoral roll and that (if you’re married) your passport, driving licence and financial records are under the same name. Any discrepancies in personal details could be flagged.
Assess your commitments
Most mortgage lenders will lend up to 4.5 times your income, but this figure is then impacted by how many financial commitments you have.
Be upfront with your mortgage lender about what you want, see what they come back with and marry up your expectations with reality – there’s no point house-hunting when you don’t truly know what you’ll be able to borrow.
Close off any accounts, bank accounts and credit cards you don’t use.
Whether it’s a bank account or a credit card that’s paid off.. Close it!
You have to provide full financial details to the mortgage lenders, so the less accounts they have to sift through, the better. Before closing any account, make sure you’ve moved any payments to another account so you don’t have any ‘bounced’ payments against you.
Stick at the job
If you’re in full time employment, mortgage lenders like to see that you’ve been in your role for at least 6 months.
They also don’t really like gaps in your employment history – so now might not be the time to throw in the towel!
If you’re self-employed, make sure you’re taking a regular salary and speak to an accountant to advise you on tax efficient ways to boost your recorded income. You can’t expect to minimise your taxable income and then borrow 10 x income.
What student loan?
Don’t worry about loans like student loans that don’t show up on your credit report.
They are taken into consideration as a commitment but they won’t negatively affect you. (Hooray!)
Check for errors on your credit report
If you can see any errors, incorrectly recorded missed payments or anything untrue on your credit report, get in touch with the company involved and see if you can resolve it before applying for a mortgage.
Got old accounts with your ex? Make sure those are closed and all outstanding financial obligations are paid off.
Don’t apply for a new credit card!
Cut down on spending, stay out of your overdraft and don’t apply for a new credit card right before you apply for a mortgage. It suggests you’re in need of funds and it’ll show as a credit check on your history.
Sort your paperwork out.
Get your P60, payslips and access to all your bank accounts ready to go.
Keep the last year’s worth of bank statements and 3 months payslips handy and make sure you have total clarity on your own financial status so you can move through the process as quickly and (hopefully) painlessly as possible!
FInd out how Colleen is helping women across the south get a grip on their finances, in her first HER feature.
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