Brian Murphy is head of lending at Mortgage Advice Bureau
Buying a house can be one of the biggest financial investments an individual can make, so while it is an exciting time for many, it can also be a daunting one. With lenders looking at all the skeletons in the closet and monsters under your bed, applying for a mortgage can feel a little scary. That’s why getting ahead by making sure you’ve got all your documentation in order and that you’re in the best financial position possible will help.
Here are top tips for homebuyers to sink their teeth into for getting mortgage ready.
- Don’t be spooked by the market
With rocketing mortgage rates and economic uncertainty on the minds of most, fear of an interest-related mortgage nightmare is understandable. However, while rate changes can affect the value of your mortgage and personal finances, they’re not doomed.
The level of impact that rate changes can have on your mortgage hugely depends on the type of mortgage deal you have. To protect your mortgage in the short term and avoid any frightening shocks, it would be worth considering a fixed rate mortgage deal which enables you to lock your mortgage in at a specific interest rate for the entire duration of the deal (typically two or five years). If current mortgage rates are sending shivers down your spine, speaking to a whole-of-market mortgage broker can help you navigate what’s on the market and is most suitable for your circumstances.
- Take the boo out of your budget
To start off the home buying process, it’s important to first identify what your budget is and what you can afford. A budget calculator or mortgage affordability calculator can help you to manage your finances and work out what mortgage you could get. Doing so will help give you a clear picture of your finances and spending habits, highlighting any areas you can tighten your belt to boost your mortgage affordability. Getting to grips with your finances can also help you create a savings buffer should, for example, unexpected financial costs or bills jump out and scream boo!
- Keep the credit score ghouls away
To purchase a home and have a mortgage application approved, you’ll need a wicked credit score to show lenders that you would be a responsible and reliable borrower, and that there aren’t any financial skeletons in your closet. Making sure you’re registered on the electoral roll, paying your bills on time and having up-to-date information such as your address are all things that will boost your score and keep the ghouls at bay. Doing the opposite will most likely cause a drop in your credit score.
- Have a paper trail, not a ghost trail
If you’ve been gifted money for a house deposit, you’ll need to show mortgage lenders where the money has come from – most importantly, proving that it is not a loan. Without clear evidence of where the money has come from (for example, from a family member or friend), mortgage lenders can become sceptical about its origins, which may delay the mortgage application process.
- Look out for fang-tastical deals
Mortgage advisers and lenders are not there to trick you. Whether your mortgage is coming to an end or not, it’s always worth keeping your eyes peeled and looking out for any deals that may better suit your needs and finances. It’s also worth keeping in mind what the terms for your current deal are and if there are any switching fees or early repayment charges. Sometimes you might find that switching to another mortgage deal and paying an early exit fee could save you money in the long run, but it’s important to speak to your lender about whether this is possible.