If you are in the process of preparing your first mortgage application, it’s important that you take some time to understand what the lender is looking for. While not all lenders have the same assessment criteria, there are some common factors that all mortgage companies will check.
A rejected mortgage application can damage your credit score, so you want to make sure that there are no avoidable mistakes. Here are the most important factors to get right.
The lender will want to know how much money you have coming in on a monthly basis. For most of us, this will be our salary from an employer, or income from self-employment or contract work. While it varies between lenders, most will ask to see copies of your three most recent payslips as proof of income, and some may ask for a P60 form as well.
Be prepared to tell the lender extra information, including your job title, how long you have worked for your current employer, whether you are on a probationary period, and if you receive any bonuses (if these form a large part of your income you may need to provide evidence of this).
If you are self-employed or a contract worker, then you are likely to be asked for your HMRC Tax Calculations and Tax Overviews from the last two to three years. You will usually also need to have at least two years’ worth of accounts signed off by an accountant, although some specialist lenders may accept one year.
In addition to this, expect to be asked for your last three month’s bank statements as additional proof of income, and also as evidence of your monthly expenditures.
All mortgage companies will look at your credit history, although some will give more weight to it than others. In general, the lender will check how much credit you have borrowed over the last six years and how much you still have to repay. They will also check to see if you have had any missed payments, defaults, county court judgements or bankruptcies.
If you do have a lower than average credit score for any reason, this will make your application less favourable to many high street lenders. This is because they will view you as being at a higher risk of being unable to meet the monthly repayments.
However, not all lenders have such rigid assessment criteria. Some specialist mortgage companies are willing to take into account your individual circumstances and will assess each applicant on a case by case basis.
The exact amount of deposit you need will vary depending on the value of the property you want to buy. Most lenders will ask for a deposit of 10 to 15% of the asking price as a minimum. If you have a poor credit history, you may be asked to pay a bigger deposit because the lender will want to cover the higher risk you represent to them.
If you would like to speak to a mortgage broker for defaults, please get in touch with us today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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Create Finance Limited is an appointed representative of Mortgage Advice Bureau (Derby) Limited which is authorised and regulated by the Financial Conduct Authority.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.
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