Guide to making a mortgage application

No matter what sort of mortgage you are looking for (whether you are a first time buyer; someone who already has a mortgage; or someone looking to remortgage), how you go about your mortgage application is very important. Some people may want to do their homework first and go direct to a lender, while others may want to use a mortgage broker.

So what is the difference?
Going direct will typically save you mortgage brokers’ fees, but unless you are 100% confident that your circumstances meet your potential mortgage provider’s lending criteria, then you may wish to bite the bullet and use a mortgage broker.

Mortgage brokers
Each bank / lending institution typically has its own criteria for approving a mortgage. As an example:

• some will be happy to lend to a self employed person while others may only want to lend to someone who is not self employed and who is full time employment with someone else;
• some lenders are sympathetic to those who may have a less than perfect credit history (this is your financial record that details all your financial goings on for the last six years including whether you have missed any payments) while others will only accept those people with an credit history;
• Young, first time buyers who may not have built up a credit history may also find that some lenders will not approve them for a mortgage.

A good, experienced and reputable mortgage broker may typically know which lender would be most likely to accept you for a mortgage. They may also sometimes have access to online deals not available on the High Street.

You may think: “So what? I’ll keep submitting a mortgage application to different lenders until I am accepted”.
The problem with this is that each time you apply for a mortgage, a credit history check is done and is recorded on your file. If you have several checks done by different organisations in a short period of time (which would typically happen if you applied to one lender after another), a potential lender may look at your file and think:”Why has this person been declined a mortgage by the X Bank? If they have declined them, what is wrong with them?” Plus, multiple or a quick succession of mortgage applications can often smack of financial desperation – again, another potential turn off for lenders.

Going with a broker may mean you can utilise their experience and that you may have a better chance of being accepted for a mortgage. A broker will also do all the chasing of the lender on your behalf, meaning a little less stress at a difficult time.

Of course, whether you decide to submit your own mortgage application yourself or via a broker is up to you. But if you go down the latter route, ask around among friends and family as to whether they can recommend a good mortgage broker. And before you sign up with a broker, check out what any broker fees may be in connection with your mortgage application.

How to clean up your credit file when applying for a mortgage

If you are thinking about applying for a mortgage, it makes sense to be sure that your credit profile is as good as it can be. By following the tips we have put together here, you can be sure that there will be no surprises for you or your lender.

• Check your credit file. This is something you should do regularly anyway, but it is even more important before you apply for a mortgage. For a very small fee, you can obtain copies of your file from the credit reference agencies, Equifax, Experian and Callcredit. This will let you check that the details they hold are up to date and correct. If any details are wrong, such as showing that you have missed a payment when you haven’t, ask for the file to be corrected.
• Set up direct debits. If you have regular outgoings, such as mortgage payments or utility bills, set up direct debits to pay them. Not only will this make it easier for you to manage your money and reduce the chances of you missing any payments, it lets lenders see that you are organised and committed when it comes to paying bills on time.
• Settle outstanding debts. If you have missed any payments for anything, get the account up to date as soon as possible. If your credit file shows that you haven’t stuck to an agreement, your credit score could well be reduced as the lender may see you as a higher risk.
• Get on the electoral register. Make sure you are properly registered at your current address, as all lenders have to verify your identity in order to comply with money laundering regulations and prevent identity theft. If you aren’t on the electoral role when you apply for a mortgage, the lender may reduce your credit score or even reject your application altogether.
• Don’t make lots of applications. In the months or weeks before you apply for your mortgage, make sure that you don’t apply for lots of other things, like loans or credit cards, which require credit checks. Every time you are credit scored it is recorded on your file, and lenders may see a lot of credit checks in a short time as a sign of someone who might be struggling to manage their money. If you see credit checks on your file that you don’t remember, ask for them to be removed.
• Check any related accounts. Your own credit file might be clean, but it is important that your partner or anyone else who is applying with you checks their file in the same way as any adverse information will also affect your application.

Remortgages and how you can play less for your home

Signing up for a mortgage is a huge commitment. It may also be one of the largest and longest-lasting agreements you will make in your life. When you sign a mortgage, you usually make an agreement with a creditor to borrow money and to pay it back to them over a matter of years. If interest rates are high when you sign up for your mortgage, you may pay high interest rates for the duration of your mortgage agreement unless you have a variable interest rate or your remortgage the house. High interest rates can add thousands of pounds to the original cost of your house. Remortgages allow you to renegotiate a mortgage deal that is more beneficial than the one you have.

There are times when it may be beneficial to remortgage a home and it is important for homeowners to know when that is. If interest rates have dropped considerably since the time that you first bought your house and entered into your mortgage agreement, you could save money by remortgaging your home. If you are making very high mortgage payments and have an excellent credit rating then you could take a strategic look at your mortgage to see whether you could arrange a better deal for yourself through the benefits that remortgages offer. Taking advantage of lower interest rates could literally save you thousands of pounds in the long run.

There are times when homeowners choose remortgages to borrow more money than is owed on their house. They do this so that they can use the extra money just as they would a loan from the bank. They choose remortgaging for many reasons, most of these related to simplifying their finances and maintain just a single loan. This type of remortgaging lets the owner use the money for things such as a holiday for the family, adding an extension to the house, paying for a large item such as a car and more.

The first step towards remortgages and taking advantage of other mortgage options is seeing whether you qualify. You should be able to get a remortgage at any bank or building society that offers mortgages as they will usually also provide remortgaging. It is important to remortgage your home when interest rates are low otherwise you might not see the types of benefits that you are hoping for. Once you have applied for a new mortgage, which is what in essence you are doing, you will need to wait to see whether or not you have been approved. If you are turned down by one company, it is not the last of your chances. A financial adviser may be able to help and match you to the right deal as most lending companies use a slightly different formula to qualify customers for loans, and the adviser should know the right company to approach. .

Comparing Mortgages

Financial services are often confusing for the layman, made all the worse by the fact that the stakes can often be high; if you don’t know exactly what you’re getting into, most people believe it’s easy to make mistakes that could cost them thousands of pounds. The worst offender for striking fear into the hearts of potential homebuyers is the mortgage. How does it work? What’s the difference between a fixed-rate mortgage and a variable one? Are there any other options? After all, this is likely to be the biggest loan you ever take out – it’s hardly surprising that many people get a little nervous about the whole situation.

However, it doesn’t have to be this way. Mortgages are not all that confusing and – while they are certainly important – you don’t have to feel as though they’re completely unintelligible.

Generally speaking, mortgages come in two (sometimes three) forms: fixed-rate, variable, and capped:

• Variable mortgages fluctuate along with the interest rates as set by the Bank of England, and as such are not entirely dependable – you could well end up paying out a different amount one year (higher or lower) than you do the next. However, it’s entirely possible by this logic that you could end up saving money on your mortgage if the interest rate drops; as such, it’s a very popular choice.
• The alternative to a variable mortgage is to go fixed-rate. This means that your mortgage provider will give you a set interest rate at which you pay back your mortgage for a couple of years at a time, after which the rate may change. Despite this, it’s still a lot less likely to fluctuate than a variable mortgage, which has several advantages: firstly, you know down to the penny how much you have to pay towards your house every month, meaning that you can budget a lot more effectively; and secondly, you can save money if the interest rate rises above the level at which your rate is fixed. However, there are some downsides; it’s likely that your mortgage provider will charge you a fee for this service, which you’ll likely have to pay up front, and you could end up paying more than you have to should the Bank of England base rate drop below the rate you’re currently paying.
• A third, but much rarer, alternative is the capped mortgage. This offers you the best of both worlds; while it’s variable with the Bank of England’s interest rate, your mortgage provider will ensure that there is a fixed highest interest rate you can pay, in effect meaning that you’re never wholly susceptible to the whims of the marketplace. While this sounds great in theory, there’s often a large fee to pay upfront that makes this unsuitable for many borrowers.

While there are more complicated mortgage packages available (especially for those who are self-employed, or have poor credit ratings), the choice generally comes down to either fixed-rate or variable. To find out which might be better for you, consider talking to a mortgage advisor or other professional, and make sure you know what you’re signing up for before you put your name (and a large chunk of money) on the line.

First time buyer mortgage for the first time home buyer

Buying your first home is going to perhaps be your most important purchase to date. A great many people may find the process of finding the right first time buyer mortgage a little daunting. Yet, it needn’t be as stressful or confusing as it might seem.

Getting your mortgage is all about knowing your product options. These range from the fixed mortgage to the tracker mortgage. The difference between the two is that one offers set interest rates while the other offers you a fluctuating interest rate.

Perhaps the capped mortgage option is best as it enables you to fix your interest rate so that it won’t rise above a certain level over a set period of time. Perhaps you want or are able to pay off more each month then you might go for the flexible mortgage option would suit you.

You may also need to have a healthy percentage to put down as part of your deposit. The higher the percentage you have to put down, the more likely you are to get approved for the first time buyer mortgage you desire.

It may be a worthwhile idea to think about all the extra costs you will incur on top of your monthly mortgage payment such as utilities and council tax, not to mention food and living expenses. So if you are not sure what you can afford to pay speak to your mortgage specialist who will be happy to sit down with you and advise you.

Remember that your satisfaction during the whole transaction process is the key to your enjoyment of your home. The first time buyer mortgage finding experience should make you feel glad that you took the plunge and put your money in something tangible such as a house.

It could also be a good idea to discuss repayment periods with them too. Generally you would take out a mortgage over a period of 20 or 25years, but this can vary. Keep in mind that the bulk of these years all you are doing is paying off the interest and even a little extra payment each month can affect and reduce the total repayment period quite noticeably, in your favour.

As a first time buyer applying for a first time buyer mortgage, you need to meet with a mortgage specialist together with the details of the property you intend buying, your personal identification, tax records as well as proof of income, bank statements and proof of any assets you may own.

Understanding mortgages - how to find a good deal

With so many different types of mortgages to choose from and a wide variety of lenders offering these products, it’s little wonder that so many of us find it hard to get a good deal. It makes sense to do this however. The money you pay every month to service your mortgage will almost definitely be the largest payment you have to make. Getting a good deal could simply give you lower monthly repayments and the added bonus of knowing that you’ll pay back as little interest as possible.

So, what steps might you take to make things easier? The first step you may want to consider is what kind of deal might suit you best. Mortgages all come with the same aim — you borrow money to buy a property and then repay what you borrow and the interest charged by your lender over a period of years. But, not all products here work in the same way and there are many different types of deals to choose from.

You might want to therefore do some research first of all into the options on offer. The more you know here, the better. Even a quick visit to a lender’s website, a financial advice portal or an online mortgage comparison site should be enough to show you the basics of the deals you may want to consider.

Next, you might want to think about where you go to get your deal. A simple solution may simply be to pop into your local bank or building society to see what they have on offer. Many people, however, prefer to dig a little deeper to see what is on offer in the sector as a whole. Finding mortgages is in a way just like shopping for anything else — if you shop around then it may be much easier to find the best deal to suit you.

There are various ways of doing this. These include:

• The ‘Do It Yourself’ approach: Here you might simply do your own research by approaching lenders to gather information on rates and deals either from branches or from their websites.
• Online comparison sites: Many people like to do initial research here by looking at financial comparison sites. You might, for example, use a site to get a quick and simple snapshot of available rates and deals without having to do the work for yourself.
• Mortgage specialists: As an alternative you may prefer to use the services of a specialist who can help you find deals and rates across various lenders in the sector.

Mortgages may all work in much the same way but they are not always equal. For many of us the main aim here is to get an affordable monthly repayment that suits our circumstances and that keeps our interest costs as low as possible. Like many others before you, therefore, you may well find that shopping around before you sign up for a deal will make the best sense.

How to clean up your credit profile when applying for a mortgage

In order to maximize your ability to get the best interest rate possible, you need to know how to clean up your credit profile when applying for a mortgage. Improving your credit rating can make a tremendous difference in your ability to get a good interest rate and good terms on a mortgage. Your credit profile is the picture of your credit risk used by lenders to determine your likelihood of repaying a loan. There are some simple things that you can do, even in the waning moments before buying a home, to clean up your credit profile.

First, check your credit file for anomalies. There are actually three main credit agencies that are commonly used by lenders and other entities who want to know your credit rating. The items in your credit, such as your loan balances, repayment history, late payments, and other factors are reported on and updated by creditors you have been involved with. Some creditors are more prompt than others at updating records. Additionally, there are mistakes that do occur. Perhaps a false late payment was reported. Maybe there are loan balances still showing on your credit profile that you no longer have. It is important for anyone wanting to get the best mortgage rate to be sure to check your credit to make sure you are getting the rate you deserve.

Another important and often overlooked factor that contributes to your credit score is your placement on the electoral roll. To some people, properly registering to vote is more of a political and civic responsibility. However, lenders want to be sure, just as you do, that your credit profile is accurate and up to date. This means that it shows your current address and provides proof that your profile is current. The three credit agencies purchase the updated lists of the electoral role at the end of each year to create the current snapshot for your profile. Some lenders will decline a mortgage application simply because the applicant is not listed on the current electoral role. Their feeling is that your credit profile may not be current if you are not on the role.

The most important thing to keep in mind is that the credit reporting process is not without flaws. Although it serves as a fairly reliable method for creditors to assess your credit risk, there is potential for errors in reporting. Ultimately, you want to get the full benefit of the work you have performed in establishing good credit. A good general rule is to take a look at your credit report at least once a year and make sure that all of the information is accurate and current.

Remember these key points to understand how to clean up your credit profile when applying for a mortgage:

• Check your file for anomalies
• Make sure all of your information is accurate and updated
• Make sure you are on the electoral role as lender’s consider this factor

First time buyer mortgage tips

Buying a home for the first time can be one of the most exciting, and most stressful events of your lifetime. The sense of independence and the excitement about selecting your new home are great fun. However, the process of looking for a home and searching the market can be exhausting. Perhaps more exhausting is the process of getting financing to purchase your new home. There are lots of options and lots of considerations when looking for the best new home loan. It is important to understand what you are getting into and to know where to go for help. Let’s take a look at several important first time buyer mortgage tips that can make your buying experience more fun than frustration.

The first thing to know about buying your first home is that many lenders have programmes in place to assist first time buyers. This assistance includes basic support during the selection and shopping process. More specifically, some lenders have nice rate plans and packages designed to help first time buyers get a fair loan opportunity despite the lack of previous homeowners and mortgage history.

Another of the more important first time buyer mortgage tips is to keep in mind all of the costs that go into buying a home and getting a mortgage. Mortgages obviously have repayment plans that include principle and interest provisions. Additionally, there are costs to close a loan including bank fees, appraisal fees, inspection fees, local council fees, application fees, and more. These expenses are typically paid by the borrower at the close of the sale and mortgage.

Consider whether you want to obtain mortgage insurance protection as well. Some lenders have notoriously pressured borrowers into taking on expensive insurance premiums by bundling mortgage protection with the new mortgage loan. New provisions from the Competition Commission require a 7 day delay between the close of a mortgage and the sale of mortgage insurance by the lender. You need to use this time to explore options in the independent insurance market to get less expensive protection. This mortgage payment protection helps you keep up with monthly mortgage payments if you face involuntary redundancy. Some plans also cover prolonged illness or accident. The benefits of the insurance replace a significant portion of your monthly income.

Finally, remember to carefully calculate all the expenses you will have in your new home when contemplating your buying range. Some people mistakenly believe they can afford to buy a bigger house than they should and end up being forced to foreclose because they cannot keep up with monthly payments. Objectively consider the costs of your new mortgage, including homeowners insurance, along with the other potential costs noted.

Here is a quick reminder of the most important first time buyer mortgage tips:

• Look into lender programs that assist first time home buyers
• Carefully consider all costs that go into buying a home and getting a mortgage
• Consider whether to obtain mortgage insurance protection
• Calculate all expenses with your new home and only buy what you can afford

Choosing a Mortgage as a First Time Buyer

Buying your first home can be a daunting and exciting prospect at the same time. The best way to deal with the ‘daunting’ part is to make sure that you base your decisions on the best possible information and that you ‘do your homework’ by researching all your options as you move towards the first step on the property ladder. This is made more difficult by the sheer amount of jargon-filled information that you are faced with as soon as you indicate that you are investigating your first mortgage.

It is quite easy to lose yourself in all the information that is available or to simply ‘fall’ for the first lender that makes a semi-persuasive case. It would therefore be a very good idea to set out a clear roadmap of how you would like to approach the process. This will prevent you from getting sidetracked by all the available options. A possible roadmap could perhaps include the following:

• Determine how much you can afford. The answer to this question will, to a large extent, determine your house-hunting and mortgage options. One part of the question is easily answered. Mortgage lenders will currently lend around 3.5 times annual income to individual first time buyers, and 5 times annual income to joint buyers. The other part of the question is more complex and will require a bit of homework and an honest assessment of your financial state. It is: “Would I be able to afford the repayments if I borrow X amount?”
• Get an agreement in principle. Most mortgage lenders will be able to supply you with an ‘Agreement in Principle’ to assist you with the house-hunting process. Having this in hand will show estate agents that you are serious about finding a property. It could also help to flag up any credit problems even before you make a formal mortgage application.
• Determine the size of your deposit: Lenders will require a deposit to be paid before a mortgage is formally issued. The size of the required deposit will differ from context to context and institution to institution but expect to pay at least between 5 – 10%. It would be a very good idea to pay more than this if you have the funds available since a large deposit can sometimes translate into a slightly lower interest rate.
• Choose the best product: There are a huge number of choices that you will have to make before deciding on a mortgage product. Some of these include: Fixed rate vs. variable rate, repayment vs. interest only and also what you would like to term of the mortgage to be.
• Decide on any ‘extras’ that you would like to be included with your mortgage: All mortgages are not created equal and there are some ‘non standard’ features that you may want to request from your lender. Some possibilities include:

• The ability to ‘underpay’ if necessary without being penalised
• The ability to ‘overpay’
• The option of taking ‘payment holidays’
• The option of having fees associated with the home buying process added to your mortgage
• Having your interest calculated daily (this can translate into a significant saving over time)

Once you have done your homework all that is left would be to find the home of your dreams and to formally apply for the mortgage from the institution of your choice. If you feel however that you will need constant advice and the ability to access a huge variety of possible mortgage deals it might be worth your while to consider using a professional mortgage broker. He/she might be able to put you in touch with lenders that specialise in ‘first time buyer’ mortgages and that can therefore tailor a package around your specific needs.

Summary:

• The first step in choosing the right mortgage is to determine how much you can afford, both in terms of the asking price and your monthly repayments.
• It is a good idea to get an ‘Agreement in Principle’ before beginning the ‘house hunt’
• There are many different options that you will need to choose from in getting the best possible mortgage. Be sure to make decisions on the basis of what is best for you and not on what the lender wants to sell to you.
• There are many ‘extras’ that you can add to your mortgage. Be clear about what you want before you formally put in your application.

Five Tips to Help You Find That Mortgage Deposit

Saving up for anything in these credit-crunch days can be a bit of a strain, but when the item in question is as big – and as important – as a mortgage deposit, the pressures involved can be enormous. How do you get started?

If you’ve been reduced to scrabbling down the back of the sofa for loose change, don’t panic. Here are five tips to help you on your way to sorting out your mortgage deposit.

1. Start early.
It sounds obvious, but it’s true. If you can approach your mortgage deposit with several months (or, better yet, years) of savings behind you, you’re going to be in a much stronger financial position, and many of the worries typically associated with scrimping and saving at the last minute will be greatly reduced. If you’re thinking of trying to get your foot on the property ladder in the not-too-distant future, start saving for your deposit now.

2. Start a budget.
When you’re saving for anything, it’s crucial to know how much you can afford to put away every week or month to reach your goal. Even if it’s only ten pounds a week, that’s still over five hundred pounds in a year – and it soon adds up. Knowing what you can afford to save gives you a target you can realistically stick to, and before long you’ll have enough to meet your needs.

3. Make savings.
Saving is, by definition, not spending money when you don’t have to. Look at your daily expenditure, and see if there are places you can cut down. Do you really need to keep that high-priced gym membership? Would it be cheaper to take a thermos into work, rather than shelling out £2.50 on a coffee house latte every morning? Is your pack-a-day habit costing you more than just your health? Tightening your belt a little can make a big difference, even if you only choose to make it a temporary solution. However, more permanent savings can also be made by taking the opportunity to scout for savings on your car tax, gas and electricity bills, or internet service provider. Better yet, if you do manage to find a saving here, the extra money can go right into your deposit without affecting your way of life one bit.

4. Use the services your bank offers.
If you’ve got a substantial amount of money saved up, stick it in a high interest savings account or a tax-free ISA to make sure your money is working for you, rather than just sitting in a standard current account.

5. Join up with friends.
First-time mortgage buyers who are in a couple typically have a major advantage in trying to save up for a deposit: dual incomes. However, singletons shouldn’t despair. Many lenders are starting to allow joint mortgage deals, letting up to four individuals share at a mortgage – a big help to those who are already looking to buy with friends. It’s certainly worth asking around, as four incomes can make the house-buying process a lot easier.

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