Lauren Sutton, financial news writer and first-time homeowner, offers some handy hints and tips about making yourself a more attractive proposition to a mortgage lender.
You’ve come across your dream house on a website. There it sits, glistening among hundreds of other, quite frankly inferior options. You view it; you want it; you must have it. The only thing stopping you from grasping the keys and getting settled in is finance.
Unless you’ve got a lump sum of £100,000-plus stored away in a savings account, it’s likely that you won’t be able to buy your house up front. You’ll be less than surprised to find that very few others do have the correct amount to hand. This is why most first-time buyers will require support from a lender to help them purchase their flat, apartment or detached house over a stretched period of time.
The product that ties this agreement together is called a mortgage and you’ve probably heard a few whispers about how it works. The size of the loan, maturity of the loan, interest rate or method of paying off the loan can all vary, but we’re going to focus on how you can actually get one.
It’s imperative that you make yourself attractive to lenders before you apply for a mortgage – regardless of the mortgage types, of which there are many – including a guarantor mortgage, low deposit mortgages and many more – so here’s how you can improve your own profile.
Boost your credit rating
All lenders will check if you are a good credit risk before they approve your loan, so enhancing your profile in this area is always a good place to start.
Lenders like to see people who are already settled in their day-to-day life. So if you’ve stayed at your current residence or job for a number of years, this is likely to boost your credit rating. Furthermore, although racking up debt will send alarm bells ringing, lenders like to see that you’ve had credit before so they can trust you.
You can be pretty cunning in this area if you want to. Try applying for a zero-interest credit card, spend £100 on it and pay that amount off by direct debit. There’s no real need to go further than this if you’re only looking to boost your rating.
(More tips on improving your credit rating can be found here.)
Find the right property
You’re not the only one meeting a lender here – so is your property. Some firms won’t take on flats that are next to certain types of businesses or homes that are made out of unconventional materials.
Find a sensible home, close to schools, shops and public transport hubs that can fit nicely inside your budget.
(Finding the idyllic location will help you gain the backing of a lender.)
Save, save, save
Though the days of the easy-reach 100% mortgage may be behind us for good, it’s not all bad news. Schemes such as Funding for Lending, Help to Buy, and the re-introduction of intergenerational products – measures all introduced in the past year – have all prompted a surge of availability in higher loan-to-value mortgages (90% or above).
But there’s still less choice at this level and they’re likely to cost much more. If you’re able to save at least 20% of the purchase price of your property, you will put yourself in a stronger position.
Having more money to pay off up front could give you a better deal on your loan. Any product that requires 25% of the property’s listed price is likely to provide a few savings and could even boost your reputation in the eyes of the lender – simply because with a 30-40% deposit, you’ll represent less of a risk.
Look for the right mortgage
Don’t apply for a mortgage based purely on someone’s recommendation. That person might be in a completely different boat to you in terms of their financial position and you’ve got a range of products to choose from for a reason.
Whether you want a product with a low deposit or one that fixes the interest rate, search, compare and assess which is the best for your own situation.
About the Author: This article was provided by Lauren Sutton on behalf of the Cambridge Building Society, which has been providing funding for people wanting to buy their own home for over 160 years. See how Cambridge BS mortgages compare on Which4U’s first-time buyer mortgage tables.