5 Steps To Take Before Applying For A Mortgage

A home mortgage will be the largest investment a person makes, on average, in their lifetime. There are many critical steps and people involved in order to have a successful closing and it only just starts with applying for a mortgage. Choosing whether to go with a large bank or a home town bank can be a huge decision and that’s just the beginning. I was fortunate to have a lot of people one my side to help me through the entire process when I purchased Grandma’s house!

(This is a contributed post, for more information about my compensation please read my disclosure policy)

If you are thinking about applying for your first mortgage, it can be an overwhelming experience. As it’s such a big financial commitment you are making, you want to make sure you get it right. The good news is that you can make the process much easier for yourself, simply by following a few steps which can increase your chances of being accepted for a mortgage loan. In this post, we are going to take a look at the five steps you should take before applying for a mortgage.

Improve your finances

Before you even consider buying a property, you need to address any debt you may have and sort your finances out. This will be extremely beneficial for you, as the less debt you have, the more you can borrow for a mortgage. Lenders will have different ways of how they calculate how much they will offer you and will take into account the size of your deposit, your annual income, your monthly outgoings like bills, childcare, loans, credit cards, etc, and they will also consider your debt and credit rating. 

It’s important to make sure you pay off your debts and ensure you pay them on time. If you skip payments it can affect your credit rating and in the process, affect your chances of being approved for a mortgage. If you can, try to pay off any loans or credit cards before applying for a mortgage, or try cutting back on what you spend each month.

Check your credit rating

Lenders will look at your credit score to see how reliable you are when it comes to repaying any money and to get a mortgage you need to have a good credit rating. You can find out what your credit score is by using agencies like Experian or Equifax to get an up to date credit report which shows your credit history. This is made up of various personal finances like your household bills, phone bills, credit cards, loans, store cards, and will also include searches of when you have applied for credit and any public records.  

If you have a poor credit score this will give you the chance to improve it and see the areas you need to work on. You can register on the electoral roll which can boost your credit rating. You should also pay bills on time, close down any unused accounts like a store card you may have forgotten about, and try to stay within your borrowing limits. Try to avoid taking out any further credit at this point. 

Decide where you want to live

If you are looking to move away from your current location to be nearer to family, for a new job, or whether you just want to completely relocate somewhere new, you need to decide where you want to live before taking out a mortgage. This can make it much more difficult to move house and can be time-consuming but it’s important to put the research in to ensure you are 100% happy with your decision. 

Thoroughly researching an area will give you an idea of what it’s really like living there, as this is something you can’t pick up on from a few visits. It’s also important to find an area you can afford to live in. Think about the type of property you want to live in, how many bedrooms you want, whether you want to live somewhere rural like a village? You don’t want to make the wrong decision and regret it, as this can end up costing you more if you look to move again. 

Compile relevant documents

For your mortgage application, you will need to compile a list of documents that will help prove your identity, your income, and your address. You will need a photo ID such as an up to date passport or driver’s license that has your current address on it. To prove your address, you will need to provide a recent letter, either a utility bill like an electricity or council tax bill or you can also use a letter from your bank.

Other paperwork you will need to show is proof of your income. If you are employed this can be payslips along with P60s. The more payslips you can show to prove your employment, the more options you are likely to have. 

For those who are self-employed, it can be a little harder. Some lenders will ask to see evidence of your earnings for the past two to three years, and you may need to show the lender your business accounts and tax returns. 

Use a mortgage broker

If you are a first-time buyer, it’s important to get the right deal that suits your lifestyle. Although you can do most of your mortgage application online, it may be worth speaking to a mortgage broker. A mortgage broker can help you find the best mortgage deal on the market that suits your needs. Sometimes mortgage brokers can have access to the best and exclusive deals. These are known as ‘broker only’ and are not available through banks or building societies. 

A mortgage broker is there to provide you with advice and handle all the hard work for you. They will search the whole of the market to ensure they find the best deal for your circumstances regarding rates, fees, and how likely your chances of your application being accepted. Using a mortgage broker is especially useful if you are self-employed or rely on an irregular freelancer income and need advice on the best way to get a mortgage. They will know the best lenders who are more comfortable with dealing with unusual circumstances. 

Following these five steps can help make the whole house buying process a lot easier for you and can also boost the chances of your application being accepted. Finding the right mortgage for you is crucial, so take the time to go through each step to ensure you get the best deal for your situation and lifestyle. 

(This is a contributed post, for more information about my compensation please read my disclosure policy)