A little about Sam
Sam is one of our VIP mortgage brokers who is CeMap qualified, Sam has 20+ years industry experience. His passion is to ensure that he understands our individual client requirements, delivering excellent solutions and providing great customer service.
Outside of mortgages he just fits enough time to watch rugby and football! Not to mention looking after his family which includes three dogs, a boxer, miniature schnauzer, and a young Labrador. Plus with four grown children keeps Sam nice and busy!
Are you mortgage-ready?
Most things in life work better if you do the groundwork first, and applying for a mortgage is no exception. Yet many would-be homebuyers and home movers in Britain do not prepare for what is ahead and get mortgage ready.
Research from TML shows that one in four UK adults do not know when they will be ready to apply for a mortgage. The TML survey confirmed that most potential mortgagees knew that credit scores, deposits and a secure income were important. But beyond that basic knowledge, most relied on guesswork. 12% thought it would take more than a year to prepare for a mortgage application whilst a further 13% didn’t have a clue.
Better with a broker
A positive statistic from the TML research was that 11% of the poll knew that they had everything in place due to support and advice from their mortgage broker. TML went on to say that this highlights the valuable role brokers can play in preparing clients and achieving positive outcomes.
Mind the gap
17% of the poll surveyed had been rejected for a mortgage at least once. This further underlines the need for professional advice, particularly in complex cases, where applicants fail to meet traditional, high-street lending criteria.
Brokers can very much help in avoiding rejected cases and finding the right lending solution. A broker can help with explaining the process and lending criteria, and then conducting research to establish which lenders are most likely to provide a “Yes Answer”.
The mortgage checklist
Here’s a clear and simple checklist of what needs to happen before you can truly be mortgage-ready.
The checklist is based on 7 key headings.
1. Proof of identity
You will need proof of ID, usually a passport or driving licence. Make sure that the document is still valid and has all the correct information, including your up-to-date address and photograph.
2. Proof of income
a. for employees your last 3 months’ payslips
b. for self-employed your last two years’ tax calculations and overviews and dependent upon your business your last two years’ tax accounts
c. for contractors, a copy of your current contract, plus bank statements to confirm contractor income.
3. Bank statements
Most lenders will require a minimum of 3 months of bank statements, where income credits and household expenditure are to be evidenced. If buying as a couple or potentially with three applicants, the lenders will generally want to see all bank statements and secondary bank statements to see a clear expenditure pattern.
Deposits are a critical aspect of your mortgage. Deposits required generally range between 5-15%.
Factors that can affect the amount of deposit required are the type of property you are buying, for example, a new build flat will generally require a higher deposit than if buying a traditional residential property that is not a new build.
Other factors will be the strength of your credit score. To apply for a 95%, loan your credit score would need to be viewed by the lender and completely fit with their profile. This generally cannot be second-guessed and an agreement in principle will generally be necessary, to establish whether an agreement can be gained.
5. Credit score
A good credit score will always help, the weaker your score and the more black marks, the less likelihood there is of gaining a mortgage. Or it may mean needing to look to specialist lenders who can take more of a lending mandate-based decision.
To improve your credit score you should.
1. make sure you are on the electoral roll that your current address.
2. ensure that your mail, bills, driving licence, and bank statements are going/registered at your current address.
3. Close any unused bank or credit card accounts.
4. Close any joint accounts where the other party has a poor credit history.
6. Spending habits
Bigger spenders can damage the chances of being accepted for a mortgage. Some yellow-flag spending habits are gambling, expensive holidays, and luxury items which appear beyond the applicant’s means. This doesn’t mean that you can’t enjoy a holiday, sensible saving and spending should allow for this and this shouldn’t impact your borrowing ability.
Payday loans should be avoided, these generally indicate to a lender a stress point in the management of your day-to-day spending and accounts.
Having a credit card for items such as food shopping and fuel is a good idea, if you clear the balance in full monthly. This demonstrates sensible use of credit and will help strengthen your score. Avoid leaving large balances on credit cards and over utilisation.
Outstanding loans or HP will affect the amount that you can borrow. If commitments like these can be paid off or avoided it will help you with your borrowing capacity.
7. Monthly expenditure
Calculate your monthly expenditure, adding together your bills such as, council tax, energy bills, insurance premiums, pension contributions, travel costs, and other financial commitments such as loans, credit cards & HP.
You will then need to add a sensible amount for items such as food, drink, clothing, entertainment, and savings. Look at what you have left, to see if this would comfortably cover your required mortgage repayments. If it doesn’t, review your expenditure, can you reduce some of your outgoings by paying off a loan or credit card as an example or getting rid of unnecessary spending?
Help is out there.
Successive UK governments have recognised the difficulties faced by would-be homebuyers, particularly first-time buyers. Various homebuyer schemes have been introduced to try and help, some with more success than others. You would need to weigh up the pros and cons of a scheme to ensure that it would work for you.
The Lifetime ISA was introduced to encourage long-term saving. Under the terms of the scheme, the government contributes £1 for every £4 saved, up to £1000, but the bonus is only payable if the saver puts the funds towards the deposit of their first home or into a pension. However, there is a limit of £450,000 on the cost of the home, which could be a problem in some parts of the country.
Other options for first-time buyers include;
· the mortgage guarantee scheme (UK wide)
· first homes scheme (England)
· homeownership for people with long term disabilities (England)
· shared ownership (England)
· new supplies shared equity scheme (Scotland)
· help to buy (Wales)
· shared ownership (Wales)
The TML research proved that many thousands of potential homebuyers and movers need advice on becoming mortgage ready.
Remember I am here to help you achieve your property goals. If you want to discuss your options, complete our quick into form here. A member of our team will be on hand to arrange your introduction call.
Sam Hubbard (CeMap / FPC / MLIA(Dip))