What’s most important when applying for a mortgage can be quite confusing. When you start researching what factors play a role, you can sometimes even find contradictory information. Does your credit score really matter? How does your deposit affect how much you can borrow? It is not always easy to find answers to such questions. But there are some important factors that everyone should consider when looking for the right mortgage. Read on to find out what you should really look for when trying to find the right deal.
What awaits you in this article:
Your deposit
The size of your down payment is one of the most important things when you want to buy a home. When you take out a mortgage, it is based on a percentage of the property’s total value, with the rest covered by your down payment. And the lower your loan-to-value ratio, the better deals you’ll find. Normally the minimum deposit is at least 5%. At a time when lenders are being stricter, it can be difficult to get a 95% mortgage and you will need at least 10% for your down payment. But if you have more, you may have better luck finding the right deal.
How much you earn (and how)
It is no secret. If you’re looking to get a mortgage, your income will affect your ability to borrow. In fact, it’s probably the factor that matters most. Lenders typically use a multiplier of your annual income to determine how much they could lend you, but also take other things into account. In the UK, 4.5 times your income is the standard amount, but you could be offered less or perhaps more. A good place to start is with a mortgage finance calculator. It can give you a good idea of ​​how much you may be able to borrow, whether it’s offered by a mortgage broker or a specific lender.
Your credit profile
When it comes to your credit history, things can get a little confusing. Some will say that it is important to keep your credit score as high as possible. Others will say that credit scores are just a number and that the specifics of your credit history are what matter most. One thing is certain: lenders will carry out a strict credit check. They want to know what current debts you have and what payments you have made so far so they can assess your risk.
Your expenses
In addition to your income, lenders also want to take a close look at your expenses. It’s great if you have a higher income, but that might not mean much if you’re living beyond your means. You want to know more about your regular payments and your discretionary spending. This will help them determine how much you can afford now and whether you can handle a rise in interest rates in the future.
There is a lot to consider when applying for a mortgage. Focusing on the most important factors will help you prepare.
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