With the financial challenges of this past year, qualifying for a mortgage can seem overwhelming. Fear not! Whether you’re hoping to buy your first house or are struggling with financial anxiety due to changes in government policy and skyrocketing costs of living – there is hope on the horizon. Knowing where you stand financially is key; fortunately, it’s easier than ever before to get an accurate idea of what type loan may ultimately be approved by getting your finances organised and understanding some new rules that have been put into play during COVID-19.

How Do I Qualify For A Mortgage?

If you’re looking to buy a home, it pays to get your finances in order before speaking with a lender. With the cost of housing on an upward trend and financial anxiety becoming commonplace, we’ve outlined some easy steps that can help boost your odds when applying for a mortgage! So take control – optimise those funds today and make sure you know how to qualify for just what you deserve.

Here Are Some Important Steps

It’s important to take the necessary steps before applying for a mortgage, so here are some tips: 

• Registering to vote is a critical way lenders check your identity and residency. Head online now if you need to register or update any details! 
• Deposit – You can also save up extra money by collecting as large of a deposit as possible – 5% being minimum but aim higher than that. 
• While doing this, be sure not to overextend yourself financially in order to get a better credit history; 
• pay debts on time and avoid taking out additional loans, especially payday ones. 
• Staying within budget will help increase more options when it comes choosing the right Mortgage deal for you!
• Consider Your Credit History

You must demonstrate you will be a responsible borrower and not stretch yourself too thin. Pay debts on time

• Pay all bills on time
• Close old, inactive accounts
• Do Not apply for additional credit, definitely not payday loans
• Avoid using or going over your overdraft
• Close any out-of-date joint current accounts that you hold with another person in case they weren’t responsible with their money. If you’re still linked to them, their bad credit record can negatively impact yours

• Keeping records of your financial activities for six years will ensure lenders have the necessary data to make an informed decision about giving you a mortgage. It’s also important that since 2011, payday loan repayment behaviour is tracked on credit files – even if payments were made promptly and in full. 
• Job Stability – To maximise your chances at obtaining a favourable lender agreement, it’s best to remain job stable with no major shifts occurring within three or more months prior to applying for borrowing privileges.-
• Check Your Credit History – In order to give yourself the best chance of getting approved for a loan or other form of credit, it is important that you check your credit record. Lenders use credit reports as part of their decision-making process and one rejection doesn’t mean all lenders won’t lend – different ones will have varied criteria when assessing applications. Since this info isn’t publicly available, be sure to request copies from Experian, Equifax or Transunion (the UK’s three main Credit Reference Agencies). You can easily do so online for only £2 – though free trials may also be available!
• Gather your financial paperwork and prepare to dazzle lenders. Make sure to have the necessary documents like:
  •  3 months’ payslips, 
  • bank statements, 
  • proof of address within UK (like a council tax bill or utility bill), 
  • P60s from last years’, 
  • Self Assessment Tax Returns if you’re self-employed 
  • deposits/savings accounts. 
  • Last but not least – ID such as passport/driving licence and gift letters for deposit assistance!
• Being aware of your spending habits is key to getting the best mortgage deal for you! Before meeting with a lender, it’s important that you take some time to get familiar with what questions will be asked about essential expenses, basic quality-of-living costs and any other payments or commitments. Understanding where your money goes can help identify areas in which adjustments may need to be made – ultimately helping secure an affordable loan package. Investing just 1–3 hours preparing now could mean big savings later on!

No More Stress Test

The Bank of England has made some recent changes to the mortgage application process, alleviating stress for potential homebuyers. While interest rates have climbed 6 times since December – reaching 1.75% this month – in coming years it is expected that mortgage rates will settle around 4-5%, offering a light at the end of what could be an arduous property search. No matter where you are on your house buying journey, there’s now one less thing to worry about!

Self Employed Mortgages

For self-employed individuals looking to buy a home, it can sometimes feel like an uphill battle. However, there are lenders who specialise in mortgages for those not employed by someone else! With two years of proof of income and some patience during the current challenging times due to Covid 19 restrictions – you could be on your way toward that dream house sooner than expected!

The UK mortgage market has opened up to self-employed workers in recent years, though getting approved comes with additional criteria and higher rates. However, the introduction of relaxed rules for buy-to-let mortgages at the start of 2020 means it’s now easier than ever before for self-employed individuals to invest in rental property without two year’s worth of accounts! With a growing number of freelancers across the country, lenders are likely responding by introducing more products specifically tailored towards this demographic.

Finally 

If you’re considering buying a house, it pays to be informed. Become aware of the things that impact your mortgage borrowing — such as your credit score and how different mortgages come with their own incentives and fees — so you can make more confident choices when it comes time to commit. Don’t forget: professional advice is always there if needed!