Buying a new home is exciting. Home ownership represents bold new beginnings, longevity, stability and hopefully a good value investment. However the whole process needs due care and attention from start to completion. Even a small error could delay your mortgage application, or even cause it to be refused. Fortunately here we outline how to prepare for your perfect mortgage.
How to Prepare for Your Perfect Mortgage
Common mistakes can easily knock your homeownership plans off track. It’s all too easy to include errors when you’re in a hurry to secure an offer on your dream house. Additionally some mortgage providers are becoming more strict about who they will lend to. So make sure you avoid these common pitfalls to give yourself the best chance of having your perfect mortgage accepted.
Lack of preparation is the number one reason for most mortgage refusals. Before you start looking at properties, you need to be mortgage ready and have your paperwork in order. Being unprepared is the most common cause for delays in the mortgage process. It pays to prepare beforehand. There’s nothing stopping you doing your research and getting your paperwork ready while you are still saving up your deposit.
Proof of Income
You’ll need at least three months payslips, bank statements and household bills to prove your income as well as your outgoings and proof of identity using your current address. The longer you can show you have been earning, the better. Lenders generally favour applications whereby you can prove that you have been earning steadily for six months or more.
No Joking Matter
Beware of joke entries on bank statements. This might sound like a wind up, but cheeky transfer references can block your honest mortgage application. If a friend has transferred cash to you via bank transfer, but with a comedy reference, your lender can refuse your mortgage application on grounds that you have unreliable, or untrustworthy income sources.
Last Two Years Accounts
If you are self employed you will need to be able to provide your accounts and tax return. Ideally you will want to have your accounts drawn up by a professional accountant for at least the last two years before your mortgage application.
Register to Vote
An often overlooked source of good mortgage point scoring is making sure that you are on the electoral roll and keeping this up to date. This provides lenders with proof of your address and how long you have lived at a property. Even if you are renting and don’t expect to stay long, you should always register to vote for this reason. It’s quick and easy to register to vote online here.
A good credit score is vital when you apply for your perfect mortgage. Lenders check your credit score to help them decide whether to agree to your mortgage application. Essentially they use it to make a judgement about how suitable the proposed mortgage is for your budget, and how reliably you will be able to make repayments. Experian, Equifax and TransUnion are three best known credit reference agencies. They hold data about your financial history, including bank accounts, credit cards and mobile phone contracts. This is used to generate your credit score, which places a value on your creditworthiness. Start building your good credit score when you begin saving up for your mortgage deposit, by consciously managing your finances and financial products.
Proof of Identity
Keep your addresses up to date for the purposes of identification. The more complete records of your whereabouts a lender can see, the better. Equally make sure all your other details are up to date on any accounts you hold. Your mortgage application will need to be in the same name as your ID documents. If you have changed your name, possibly due to marriage, civil partnership or any other reason, make sure this has been updated on all your relevant accounts before you start your mortgage application. This will clear up any confusion and hopefully avoid hold ups. Equally make sure any middle names appear on your passport and any other form of ID you are submitting as proof of identity.
Proof of Deposit
Your lender will want to know where your deposit has been raised from before approving your mortgage. If it’s in your savings which you have built up over time, you’ll need to show the evidence, from bank statements, or Premium Bond or Isa account. If the deposit is a gift from relatives, you’ll need a gifted deposit letter, stating that this is the case. This letter needs to include their name and your name. The total amount given. A statement that it is a gift. A statement that the gift has no commercial interest. Confirmation that the gift giver has no stake in the property. Confirmation that the gift giver can afford to give you the money This letter then needs to be signed by an independent witness and given to your solicitor. The letter should be submitted along with your mortgage application. If the money has come from an inheritance, you should have a letter from the executor of the will and a statement showing the money being paid into your bank account. All of this protocol is due to anti money laundering measures. Due to the sums of money involved with buying property, the lender needs proof that your money has been raised from a legitimate and legal source.
As stressful as it can be, your mortgage advisor wants you to succeed and ultimately they are in the position they are in, to help you achieve your goals. Lenders use underwriters to assess your mortgage application. The details you provide will be checked against a number of indicators with a fine tooth comb. Be realistic and select a mortgage advisor who understands your unique position. If you have any risk factors like bad debt, disclose it upfront rather than waiting for the lender to find it and question you. Don’t try to exaggerate your income, or play down your outgoings. They need to have the ability to assess whether you can comfortably afford the debt you will take on. At the end of the day there are lenders suited to all sorts of different circumstances. So find the right one for you and start your mortgage journey consciously and with an open mind towards building your lendability with the tips we have outlined here.
At Prestige Business Management we can help your Business
Prestige Business Management can help you with your mortgage preparations and recommend the perfect mortgage advisor when you feel ready. Call us today on 0203 773 2927.