Mortgages
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Applying for Mortgages at any time can be a daunting and nervous experience, especially if your a First Time Buyer. However, if you’re well prepared, there’s no reason why you should not be successful and hit the bullseye first time.
Above all, the key thing to understand is that the Lender will be looking for affordability. They’ll only offer you a loan if they think you can pay it back. This applies to all Mortgages, even for a Second Home and Remortgage.
3 key factors to getting Mortgages
Your income
The amount of income you earn, and the stability of that employment is crucial. Lenders need to see if, after all your expenses have been paid, you have enough regular income to cover the Mortgages monthly payments. Also that you have a monthly buffer to cover any unforeseen emergencies. Importantly, all Lenders will have their own criteria to make sure that you do not overstretch yourselves and get into trouble.
As a rough guide, you’ll usually be able to borrow up to 5 times your salary (or combined salary, if you’re applying as a couple). Although, this does vary from Lender to Lender and we do have some Lenders that will lend up to 6 times your income.
All lenders will need you to prove your income either through payslips and P60s if you’re in full time employment. Alternatively if you’re Self-Employed it will be through your Accounts or Tax Overview. So it is very important you have the Latest Proof of income to hand.
Your expenditure
It’s all good showing your income however, when assessing your ability to pay your Mortgages monthly payments, Lenders will also look at your regular expenses. Particularly what is coming in and what is going out.
Furthermore, you will be required to provide them with a list of all Debts, i.e:
- Student Loans
- Car Finance
- Credit Cards
- Personal Loans
In addition to your fixed debts they will ask for your monthly expenditure for items. For example :
- Food
- Energy Bills
- Travel
- Car Costs
- Gym Membership
- Life Insurance
- Subscriptions
It’s important you are truthful with the figures and amounts as all the Lenders can and will cross reference your stated figures with what’s happening in your Bank statements. Furthermore, all Lenders will check your credit file. Here they will see a list of all of your outstanding Loans & Credit Cards & their Mortgages monthly payments. So they know more than you think.
When working out your affordability its important to understand that all Lenders will deduct your monthly debt figures from your monthly income. Then they use the nett figure towards your affordability.
In a nutshell the more debts you have, the less you can borrow.
If you are looking for information on Buy to Let or Buy to Let Remortgages, get in touch to discuss your specific Mortgage needs in more detail.
Expert tip – To get Mortgage fit you should be prepared to cut back on any non-essential outgoings. For example: expensive gym memberships, eating out, takeaway habits, reassess your phone contracts. Do you need the expensive Sky Entertainment package?
Your credit history
Everybody in the UK has a credit record which they have built up over the years . This record is used by agencies to give you a credit rating (or credit score). This credit record is a history of all of your:
- Loans
- Credit cards
- Store cards
- Car Finance
- Credit Agreements
This means a record of all of the:
- Loan amounts
- Monthly payments
- Payment history
Payment history is critical because if you have not been making the regular payment on time you could have a history of missed payments, this is not good as there are some lenders that will not lend to people with missed credit repayments.
Or Worse, if you have had any loan Defaults or CCJ’s then your choice of Lender will be greatly reduced.
So, the healthier your credit rating, the more choice of lenders you will have for a mortgage.
We always advise our customers to get a copy of their credit file before starting the Mortgage search.
Expert tip – Consider using up to a maximum of 25% of your combined available credit on an ongoing basis. So if your combined credit limit is £1000, try not to hold debt beyond £250.
Why Us
- Raising The standards of financial advice
- Making financial advice accessible to all
- Trusted & stress-free financial advice
- Friendly, personable advisors
our Mortgage Butler service
Help you to collate all of the documents you will need to apply for a mortgage
Complete and submit your application
Handle all the enquiries by the Mortgage Lender
Liaise with your Estate Agent
Help you to nominate a good & competitive solicitors
Work with all the parties to get you to Mortgage completion
Keep in touch with you on a yearly basis and help with your future needs
Berks & Bucks Finance has a commercial arrangement under an affiliate programme with Check My File and is remunerated for referrals.Please be aware that by clicking onto the above link you are leaving the Berks & Bucks Finance website. Please note that neither Berks & Bucks Finance nor (the Network) are responsible for the accuracy of the information contained within the linked site accessible from this page.
Why have i been refused a mortgage?
Having your Mortgage application refused can be not only disheartening, but it can also be inconvenient as it puts all of your house buying plans in limbo and in some cases to a complete halt.
All lender will have different criteria for Judging your Mortgage, however a majority of the main stream lender will assess the following areas:
All lenders will have different criteria for assessing your Mortgage affordability.
- A vast majority of the lenders will have computer software that carries out this check, so it could be that the lender has done a review of your income and debts and calculated that you will not be able to make the mortgage repayments.
- The lender has reviewed the documents provided (eg. payslips, bank statements, P60) and are not happy with the information as it differs from the figures on the application.
- You are self employed and the lender is not happy with the accounts provided. Or maybe you do not have the required amount of years accounts available.
When you apply for a mortgage all lenders will run a check on your Credit Report. For one of the reasons below they could consider you to have a bad credit history.
- You’ve had a default or a CCJ registered in the past six years.
- You’ve missed or made late payments recently.
- You’ve made too many credit applications in a short space of time. Resulting in multiple hard searches being recorded on your report.
- You’re not registered to vote on the electoral roll (this is used for proof of your address)
- There are mistakes or errors such as incorrect addresses on your application form.
- Each lender has their own type of customer / criteria target that they would like you to meet. This basically means the type of business that lender wants to do.
- An example would be a customer with a bad credit history has applied to a mainstream high street lender and been declined. However there is plenty of lenders that specialise in bad credit mortgages that probably would have accepted.
- So in a nutshell you have basically applied to the wrong Lender. This is why you may find it helpful to use a Mortgage Broker who’ll be able to assess your financial and credit information and find a mortgage that’s likely to fit and be accepted straight away.
What should i do after being refused a mortgage?
You should try to address the potential reasons why you were refused and get them rectified or find the best lender for your circumstances.
Find out why you were refused
If you haven’t already, ask the lender why your application was declined.
Be attractive to lenders
Mortgage providers need to know that you’ll be a reliable and responsible borrower. So, depending on the reasons for refusal, get them rectified so that your file will not show anything to say otherwise.
Can you reduce your debts?
This helps your affordability as you will have less outgoings compared to your income.
Can you increase your Deposit?
This reduces your Loan to Value ratio and helps with your affordability.
Be honest and Precise with your Information
Making mistakes on your application form can be easy. Take your time to fill it out carefully. Be accurate with the information provided and not vague. They will always find out the truth.
There are various options available after you have been refused a Mortgage, however in our opinion it’s best to get in touch with Competent Mortgage Broker who can help by working through the different layers of issues and come up with a suitable solution.
Does being refused a mortgage affect my credit score?
Being refused for a Mortgage at AIP stage won’t hurt your credit score as the majority of lenders only do a soft search. This means that your credit report will show that you applied for a mortgage, but it won’t show whether you were accepted or declined
However, being refused a mortgage at Full application stage can make a difference as all lenders will leave a hard search which means that your credit file will show that you failed a Mortgage Application along with the name of the lender.
Unfortunately, for some customers refusal of a mortgage can lead to more attempts to get one, and each application will leave additional hard searches on your report. These additional hard searches can lower your Credit Score and reduce your chances of acceptance.
Think about it…. if a Mortgage Lender can see that you have been refused a mortgage by 3 other lenders it will be very cautious about your application
What is an Agreement in principle?
An ‘agreement in principle’ also known as a ‘decision in principle’ is given by lenders to say that, based on the basic information provided about you, they believe they would give you a mortgage of a specific amount. It can be useful to have an agreement in principle when your house-hunting, as it gives you an idea of what you can afford, and also speeds the process up when you do find that dream home.
When carrying out a AIP the lender only does a check on your Credit Report it does not review any of your required documentation i.e
- Payslips / business accounts
- Bank statements
Questions to ask your Mortgages Broker
What Mortgages Lenders do they have?
When choosing a Mortgage broker make sure they have a comprehensive list of lenders.
Importantly, Lenders that have specific products for First Time Buyers, Buy to Lets and Bad Credit Mortgages. These could be smaller, less known lenders that do not deal directly with the public.
How do Mortgage brokers get paid?
You might be wondering how a mortgage broker get paid. As a Mortgage Broker is processing the application for the Lender, they will get paid for this work.
The amount usually depends on the size of the Mortgage and varies slightly from Lender to Lender. We are transparent with our Fees and this Lender Fee will be shown on your Mortgages Illustration.
In addition to the Lender Fee, we will also charge a Broker Fee. This varies from case to case.