House prices have soared, and interest rates have risen while wages have stayed stagnant, making home ownership even trickier. So how to get your home ownership ducks in a row? How do you get ready to convince a bank or private lender to give you a mortgage?
Get help from the professionals
As with many specialist things done for the first time, buying a house is a process that can certainly benefit from expert advice. So, if you’re uncertain about how much you can borrow, or are unsure about your eligibility, the first thing we recommend you do is enlist the services of one of our experienced mortgage brokers.
Our mortgage brokers can save you a lot of time and money and improve your chances of being accepted for a mortgage. Not all banks have the same lending criteria and whilst one bank may decline your loan, another may approve it. Our advisors will know which lenders are best suited to your particular circumstances and they can help you prepare for your application.
Boost your chances of success
The mortgage application process has become more challenging in the last nine months. Banks require a lot of information about you, your income, your employment history, and how you manage your money. So, speed up the application process by having 90 days of bank statements ready.
You need to show:
• Consistent deposits from income
• A monthly surplus after expenses.
• Expenses that align with those declared in your loan application
• No unarranged overdraft fees or bounced automatic payments.
What can you do to get ready?
Lenders will want to assess your money management. To be prepared, we recommend start the process sooner rather than later and take even up to 6 months to prepare your bank account for submitting your application. If you’re not sure what to do, we can help.
Our brokers can ascertain which bank best suits your needs, who you will qualify with, and who can give you your maximum loan. After receiving go ahead from our advisers, we can talk you through the steps involved in making an offer.
Step 1:
If you are not already with the bank we have recommended for you, then you should open an account 3 to 6 months beforehand and transfer your regular income. Use this time to build savings by putting away a set amount each month. If you can demonstrate regular and ongoing savings, it will help prove that you are able to manage on your income, have capacity to save and are thereby able to service a mortgage.
Step 2:
Banks and lenders will be looking very closely at every detail of your financial wellbeing, so you will need to be aware of how you spend your money weekly, monthly and yearly. They’ll look at all your expenditure, whether it’s essential or discretionary, and they will check how much is spent in a range of categories, such as living expenses, food, petrol, utilities, travel, etc.
Take time to look at your income wastage. How much money is disappearing on non-essential purchases you might be able to put the brakes on? Focus on improving your spending habits. Are there monthly subscriptions that you’ve forgotten about? Do you have membership to a gym you never go to? Have a look at regular voluntary donations, and think about non-essential spending on fast food etc. Maybe you could rein in luxuries such as takeaway on speed dial and regular pricey nights out. You will be assessed on whether spending behaviour is habitual, meaning it’s unlikely to change, or one-off, so prioritise your goals and try to refrain from impulse spending.
Step 3:
Look at your debt. First and foremost, when you’re talking to our mortgage broker, ensure you disclose all debt you may have. Any undisclosed debt that later comes to light can hurt your chances of getting a loan.
Put together a list of all your credit cards, buy now pay later, laybuy, overdraft and loan debts and check how much you owe on each and what you’re paying each month. It might be that you’re paying off a car loan at a higher rate than is necessary. You may be able or renegotiate to extend terms over a longer period and therefore increase your capacity for a home loan. It may be that a consolidation loan to pay off what you owe is also worth considering.
Step 4:
The better your account conduct the better your chances of getting that home loan. Banks will scrutinise how well (or not) you manage your account. Do you have dishonours, or unauthorised overdrafts?
Look after your debt. We recommend that if you have any outstanding defaults that you pay them before you submit your application to the bank.
Always pay all your bills on time. It might seem obvious, but make sure you do it. All missed payments count against you. Missed mobile phone payments could be the difference between getting a mortgage and not, so it’s vital to keep up all repayments on all outgoings. Where possible, set up a direct debit to make sure payments are made on time.
Manage your money well. Ensure that you keep within your arranged facilities with the bank and don’t have any unauthorised overdrafts.
Pay off the full balance of your credit card each month. If you only pay the minimum, the bank will allocate a portion of your income to service the credit card. They may allocate 3-4% per month of your credit card limit – not the balance – to service the debt.
Getting your account in shape
It might seem daunting, and you’ll need to be prepared for personal questions about your circumstances and a review of all transactions on your bank statement but putting the steps we have outlined into practice can take you a long way towards owning your own home.
**These are general guidelines and are by no means a reflection of bank or lending policies