From checking how much you are likely to be able to borrow to planning ahead of an application.
Get a Realistic Figure
One of the first things you should do is get a realistic idea of how much you’ll likely be able to borrow so you can determine if it is worth moving forward. This will depend on 3 main things:
- Your income
- Your expenses
- The size of the deposit you plan to put down
When you apply, the lender will complete a detailed affordability assessment to work out what you can afford to repay based on your income and expenses. Lenders have to assess your ability to repay if interest rates go up or if there are any major changes in your circumstances.
Check Your Credit
Before applying for a mortgage, check your credit with one or all three of the main credit reporting agencies (Equifax, Experian, and TransUnion). This will alert you to any issues that might need to be addressed before being turned down or offered a less competitive mortgage interest rate.
Make sure your report is accurate and up-to-date, and dispute anything you don’t agree with. You can use a Notice of Correction to explain special circumstances surrounding previous or arrears or defaults, such as illness.
The reporting agencies typically offer several ways to check your credit score. Some ways are free, others you may need to pay for.
Keep Credit in Good Standing
Watch your credit score closely prior to applying for a mortgage. During this time, avoid applying for any other loans, “Buy Now, Pay Later” deals, payday loans. These things can put off a lender.
Review Your Bank Statements
A mortgage lender will typically require at least three months’ bank statements as part of their affordability check. The lender will go through them very carefully to see if you are financially healthy and can afford the payments. Therefore, it’s prudent to cut back on your spending and reduce/clear any overdrafts.
Register to Vote
Some lenders use the electoral roll to confirm who you are, so make sure you are registered to vote at your current address.
Think About a Broker
A mortgage broker can survey the market and help you find a deal that’s right for you. It’s a good idea to use one if you have past credit issues or your employment or financial situation is more complicated. There are a number of mortgage brokers offering fee-free advice.
For more information, contact Penny at (206) 618-5123 or email me at Penny@TheOriginalPenny.com.
Serving: Bainbridge Island, Poulsbo, Silverdale, Kingston, Bremerton, Port Orchard, Port Ludlow and Ocean Shores.