Things to Know Before Applying for a Mortgage

Deciding to get on the property ladder and buy your first home is an exciting milestone. However, the process of applying for a mortgage can seem daunting if you’ve never done it before. Here are some key things to know before applying for a mortgage.

Check Your Credit Score

One of the first things mortgage lenders will look at is your credit score. This provides them with an overview of your financial history and how reliably you’ve paid back debt in the past. 

Before applying, it’s a good idea to check your own credit score so you know what mortgage lenders will be seeing. There are various credit checking agencies you can use for this. Make sure you go through your credit report and check for any errors or misleading information that could adversely affect your application. If there are any problems, get them resolved before you apply.

Have Your Finances in Order

Lenders will want to see that you have a stable income and healthy finances. Gather employment and income evidence like payslips and P60s. Have bank statements ready to show regular income and outgoings. Avoid any large purchases or credit applications in the months leading up to your mortgage application. 

You’ll also need a deposit saved up. Have at least 5-10% of the property value ready for the deposit. More is better, as it allows you to access more competitive mortgage rates. Shop around to get the best interest rate based on your deposit amount.

Consider Mortgage Affordability

Mortgage lenders have strict affordability criteria these days. They’ll assess your income, outgoings and credit history to calculate how much they’re willing to lend you. This is based on multiplying your annual income by around 4.5 times.

Use online mortgage calculators to estimate how much you may be able to borrow. Be realistic about what you can afford in monthly repayments. Factor in other costs like home insurance, maintenance and moving fees too.

Understand Different Mortgage Types

There are various mortgage products to choose from. Common options include fixed rate, tracker rate, offset and standard variable rate mortgages. Consider which best suits your budget and plans. Fixed rates offer certainty over monthly payments, while tracker rates follow the Bank of England base rate.

An independent mortgage broker that offers specialist products like bespoke mortgages for professionals can explain the pros and cons of different products, such as the benefits of mortgages for professionals. Make sure you understand any extra fees and charges too.

Compare Mortgage Lenders

If you aren’t working with a broker, don’t just go with the first lender you find. Spending time comparing mortgage rates from different banks, building societies and online lenders can really pay off. Even a small difference in interest rates can save you thousands over the course of your mortgage. 

Comparison websites can give you an idea of what deals are out there. But speaking to a broker provides tailored advice on the most suitable lenders and products for your circumstances. 

Following these tips will put you in a much stronger position when applying for your first mortgage. Do your research, get your finances in order, and seek professional advice. This will make the process of realising your homeowner dream that little bit easier.