(Akiit.com) Being in a position where you can choose to get a mortgage is an excellent position to be in. You get to decide on your new house, your furniture, where you live – everything about buying a house is a fun process, except the bit where you have to talk to a lender, of course.
It’s a nerve-wracking process to get a mortgage, and the approval process isn’t as simple as you’d think it should be. It’s so much more than filling out a form and saving a deposit. You may notice that lenders have tightened their lending restrictions lately, particularly in the face of coronavirus doing a global spin. The best thing that you can do before you get out the personal finance calculators is to know what lenders are looking for. If you know what the lenders want, it makes calculating your finance that much simpler. So, let’s take a look at exactly what lenders look for when you are applying for a mortgage.
- They look at how you can pay back your loan. A mortgage is the biggest loan you may ever take out in your life. Before you can be given
it, your lender needs to know you can definitely pay it back. Lenders will look at your earnings, your savings record, your ability to pay for your rent. They’ll even add it all up with any partner income in your house to see whether you can afford your mortgage with your partner. Your ability to pay your mortgage will be assessed before any money is loaned. - Your bank statements are next. Your lender will look at your bank statements to see what your financial habits are like. You’ll likely be asked for six months worth of statements for both your bank and your credit cards. You need to make sure that your money is going to things that you want a lender to see – such as your savings account. Your statements will reflect your ability to pay rent, to save and to manage your money without borrowing.
- Your loan record will be overseen by your lender, too. They want evidence that you can make repayments to any borrowing, and they will check your credit score with a credit bureau for your country, too. Your credit rating will tell them whether you owe money, have any County Court Judgements or have even been bankrupt before.
- Proof of income is so important for your mortgage. If you can prove what you earn, you can prove that you are able to make payments to your mortgage. Always base your mortgage application on your income before bonuses and commissions, too. You’ll be able to show that you are extra comfortable if you do it that way!
- Your tax records will prove that you are paying your taxes and you don’t owe the government any money. If you are self-employed, you will be able to show at least three years of accounts to your mortgage lender, and this will ensure that they have a whole picture of your finances.
Staff Writer; Steve Brown