How to Pass a Mortgage Application with Flying Colours
For first-time property buyers, applying for a mortgage is comparable to having a job interview. You need to be able to ‘sell’ your assets and yourself in order to make a good impression on the mortgage lender. So how do you do this? Simple: by preparing yourself, by being aware of your exact budget, and by making sure you have a good credit report.
The importance of being prepared
If you want to increase your chances of getting your mortgage application approved, you need to prepare yourself. This means preparing your financial resources and making a thorough assessment of your financial circumstances and situation, both in the present and in the future. There are also other ways in which you can prepare yourself – one is to increase your monthly payments on your credit card bill. Lenders will be able to see this and take note of it, and it will surely be a boost for your credit rating as well. Another way to prepare yourself is to not take on any additional loans or borrow any more money, not just before you apply for your mortgage, but as soon as you decide that you want to buy property.
Once you have determined to purchase property, take a long and hard look at your expenditure over the past few months so you have a better idea of your spending habits. Ask yourself this question as well: can you afford to let go of certain expenses so you can have more savings in the bank? Lenders want someone who shows that they have the means to pay back their mortgage. This is why lenders often ask a lot of questions regarding your income and expenses so they can decide if you are worthy to receive a mortgage and how much they can lend you in turn.
You can also show lenders that you are financially stable by becoming more organised with regards to your spending, especially when it comes to utility bills, childcare, service provider bills, loans, and more. Asking questions about your expenses will give lenders a better idea of your priorities and how capable you are of paying back your mortgage. You may want to consider cutting down on some of your expenses so you can have a more realistic estimate of how much you can truly afford to pay back each month.
Assess – and know – how much you can afford
Before you even start searching for that dream property, you should already know how much you can afford. It’s useless looking for properties that will cost much more than your budget. To give you a better idea of how much you may be able to afford, keep in mind that your mortgage payments shouldn’t be higher than thirty to forty percent of your net income per month. When trying to find out how much you can afford, make calculations as well of how much you can pay per month if the interest rate rises by 1%, by 2%, and so on.
Keep track of your credit score
Apart from keeping track of your expenses and knowing your budget, you should also make it a point to know your credit rating. Contact a credit reference agency to gain access to your own credit report, which can date back to the past six years. Your credit report will make a significant impact on the lending decision to approve your mortgage or not. If you find any discrepancies, such as wrong information about debts or repayments, then you have a chance to get this fixed before the lender sees it.
If you would like comprehensive and reliable mortgage advice, you can turn to mortgage advice Chelmsford experts from Flagstone. A good mortgage advisor in Chelmsford can point you in the right direction and may even open doors for you for the best mortgage deals in your area.