Applying for a mortgage is a big step. With the rising cost of living, many people are worried that they aren’t prepared for the financial responsibility a mortgage brings. With some solid preparation, finding a mortgage that suits your needs may not be as difficult as you think.
For most people, the dream of owning a new home is just a few steps away. Here are some things you should do to prepare yourself before getting a mortgage.
Use a Mortgage Calculator
A mortgage calculator will give you a good indication of the amount of money you could borrow and how much it will cost you. However, this is just a starting point. Nothing you see is set in stone because different lenders will give you different rates.
Once you have an idea of the money you can borrow, you can set it off against the type of property you’re looking to buy. If the money indicated isn’t enough, there are some things you can do to put yourself in a better financial position.
Clear Your Debt
Clearing debt is never simple but if you can get rid of as much debt as possible before applying for a mortgage, you’ll look far more attractive to lenders. It could mean that you need to spend the next few years buckling down and clearing as much debt as possible.
Instead of going on a holiday abroad, use the money to lower your debt. You can also save a lot per month by not buying takeaways, not paying for tv subscriptions, and not buying coffee in the mornings. Every little bit of money you put aside brings you one step closer to your dream property.
If you’re not able to clear your debt before applying for a mortgage, it’s wise to consult with mortgage brokers so you can get the best deal. A mortgage broker can look through a variety of lenders and find you the best deal.
Check Your Credit Score
Lenders will look at your credit score before offering you a mortgage so it’s important that you know what your credit report contains. The better your credit score, the more likely a lender will be to offer you money.
If your score is poor, there are many things you can do to improve it before applying for a mortgage. For instance, never miss payments and keep records up to date. You can also correct any false details on your credit report that may be affecting your score.
Getting a mortgage involves a lot of paperwork. A lender will want to see proof of your identity, proof of your address, proof of your income, and much more. It can help to have all this paperwork ready and waiting when you’re ready to apply for a mortgage.
If you need to spend time searching for these documents or ordering copies, it can push back your application by weeks, if not months. For example, if you need a new passport as proof of ID, it can take up to three months to return to you.
Mortgage In Principle
Before you get an actual mortgage, you’ll be offered a mortgage in principle. This is a letter from a lender stating what you could lend based on an initial assessment of your finances. When you want to put an offer in on a property you like, you’ll need a mortgage agreement in principle for the owners to accept your offer.
Although it’s not a formal mortgage, an AIP is usually the best indication of the money you can borrow from a lender and most people get the amount stated in their AIP.
Do Your Own Research
Getting a mortgage for the first time can feel like walking through a minefield. The less you know, the more unpleasant surprises you’ll get. Even if you decide to work with a broker, it’s essential you do your own homework too.
This is not just a good way of making sure you don’t miss out on any deals. It’s also ideal for educating yourself on how mortgages work and what you can expect during the process. If you have to have a face-to-face meeting with a lender, good research will aid you during your interview.
Whether it’s your first mortgage or you’ve had a mortgage before, preparation is the key to getting what you need. Follow the steps above and you can be sure you’re as prepared as you can be.