Getting a mortgage is an arduous task. Even people who have had mortgages in the past find it hard to get approved and, for first time buyers, the task is even harder. For many potential buyers, saving a large sum of money before starting the approval process can lead to them saving thousands of pounds on mortgage payments annually. By knowing exactly how the process works you can secure a lower interest rate and increase your chances of being accepted for an appropriately sized loan.
A Change in Lending Practices[/b]
The current economic climate means that banks are constantly changing their lending criteria. The financial crash of 2008 transformed the way that banks lend their money, with the Citizens Advice Bureau accusing them of irresponsible lending. This tightening of lending regulations, however, has made it almost impossible for first time buyers to secure a mortgage as they are deemed to be too much of a lending risk. To get a mortgage, applicants need a good deposit, a clean credit history and a decent income.
Unfortunately, this means that now more than ever, young people will require help from their parents in order to get a mortgage. Without them, it seems as though there is very little chance of them getting the necessary deposit.
Deposit Size[/b]
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The larger the deposit, the more chance you have of being accepted. This is because the size of your deposit determines your monthly mortgage payments and your rate of interest. The smaller the deposit you put down the more you will pay overall.
Although it is possible to get a mortgage with only a 5% deposit this is not advisable. Even a rise of only another 5% can make a huge difference to your monthly repayments and, although it is hard to save in the current climate, it is definitely worth waiting for another couple of years. In addition, interest rate savings are more substantial with a longer term mortgage.
Securing a Mortgage Deal[/b]
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Before assessing you for a mortgage the bank will want to know a lot about your financial situation. This includes your monthly expenses, outgoings, incomings and money left in your account each month. All debt is taken into account and any credit cards and outstanding loan payments will reduce the amount that you can borrow.
Interest only mortgages in particular have become incredibly hard to acquire and these typically now require a 25% deposit to qualify.
Shopping Around for the Best deal[/b]
Once you’ve got a large deposit and eliminated your debt it is worth contacting the bank and enquiring. Different banks, however, have different policies and it is worth shopping around. Comparison sites such as Rite Mortgages can help provide you with impartial advice if you’re struggling to find the best deal.