Here are some tips that will help you to get a good deal on your mortgage:
Build the Biggest Deposit You Can
The higher the down payment you put down, the cheaper your mortgage will be. Mortgage lenders tend to charge lower rates of interest to buyers who put down the biggest deposits. Putting down a big down payment means that the lender will loan out less money. It also means that the house’s value has to drop further for a lender’s funds to be at risk.
Lenders usually want to know where you are getting your down payment. If you are using your savings, you have to print out a statement to prove it. On the other hand, if you are receiving funds from your parents, you need a letter from them specifying whether the cash is a gift or loan.
What Can You Afford?
You need to check the cost of homes in the location you would like to live. Once you find out how much they cost, you should work out how much down payment you can afford, and how much you will need to borrow. In most cases, you should be able to borrow up to four times your income.
If you are borrowing as a couple, you can borrow up to three times your joint income. You might have to use a mortgage calculator to compute the amount that you will pay towards mortgage each month.
Look at Your Credit Report
You can take advantage of three main credit reference agencies – Call Credit, Equifax, and Experian – to get a free credit report. Your credit report gives a general idea of how well you have managed your debt and borrowing over time. Looking at your own credit before approaching a lender is advisable, because it will allow you to correct any inaccuracies that you find.
When you apply for a mortgage, your potential lender will do an affordability assessment to determine whether you can afford to pay it back. To carry out this assessment, a lender will ask for your bank statements for the past 3-6 months. If you want to have better chances of getting your loan approved, you should:
– Cut down your spending as much as possible
– Pay your debts and close the accounts that you no longer use
– Avoid gambling online
– Avoid taking out payday loans
– Cancel any unnecessary direct debits
Have Your Documents Ready
When you decide to apply for a mortgage, the lender will ask you to provide the following documents:
– Bank statements that span the last 3-6 months
– Driving license or passport as well as your utility bills
– Proof of benefits
– P60 from your employer
– Pay slips from your last three months
– Proof of the source of your deposit money
Buying of property is the biggest commitment that you can make financially. For this reason, it is important that you understand all the available options before making a choice. Once you figure out what you are getting yourself into, you will be a step closer to acquiring the right mortgage to purchase your dream home.
Applying for a mortgage is a very stressful and time-consuming process. However, if you follow the above tips you will get the best mortgage for your needs. Make sure that you take your time during mortgage application.