Once you’re a homeowner, your house will probably be the biggest, long-term investment you have, says Rachel Cruze in her book Love Your Life, Not Theirs: 7 Money Habits for Living the Life You Want
She added that, every dollar you spend on a mortgage or down payment is like putting money in a house-sized piggy bank.
Agreed, owning a property is an investment that we all must make in order to not only become financially free and prosperous, but to keep our families safe against bad economic times.
That said, it is therefore quite vital to know what help is available and where to find a mortgage.
In this article, I list and explain five practical tips to get approved for the mortgage loan you need to buy a home.
5 Practical Tips to Get Approved for a Home Mortgage Loan in the UK.
Most people hear reports of dropping interest rates and lower home prices and hastily decide to jump into home ownership, but what they don’t know is that getting a mortgage loan is a process, and it is different from car and some other loans
Therefore applicants who don’t recognize these key differences are often disappointed when a lender denies their mortgage loan application.
1. Know Your Credit Score
It literally takes a few minutes to pull your credit report and order your credit score. But surprisingly, some future home buyers never review their scores and credit history before submitting a home loan application, assuming that their scores are high enough to qualify. And many never consider the possibility of identity theft. However, a low credit score and credit fraud can stop a mortgage application dead in its tracks.
Credit scores and credit activity have a major impact on mortgage approvals. Before applying for a UK mortgage, check with the three credit reporting bureaus – Callcredit, Equifax, and Experian – and ask for a free credit report to make sure there are no reporting errors.
2. Save up.
Requirements for getting a mortgage loan often change, and if you are considering applying for a home loan in the near future, be ready to cough up the cash. Walking into a lender’s office with zero cash is a quick way to get your home loan application rejected. Mortgage lenders are cautious: Whereas they once approved zero-down mortgage loans, they now require a down payment.
Down payment minimums vary and depend on various factors, such as the type of loan and the lender. Each lender establishes its own criteria for down payments, but on average, you’ll need at least a 3.5% down payment. Aim for a higher down payment if you have the means.
3. Pay Up and Avoid Debt
You don’t need a zero balance on your credit cards to qualify for a mortgage loan. However, the less you owe your creditors, the better. Your debts determine if you can get a mortgage, as well as how much you can acquire from a lender. Lenders evaluate your debt-to-income ratio before approving the mortgage. If you have a high debt ratio because you’re carrying a lot of credit card debt , the lender can turn down your request or offer a lower mortgage. This is because your entire monthly debt payments — including the mortgage – shouldn’t exceed 36% of your gross monthly income. However, paying down your consumer debt before completing an application lowers your debt-to-income ratio and can help you acquire a better mortgage rate.
4. Know What You Can Afford
Get a home that fit comfortably within our budget.
Don’t let lenders dictate how much you should spend on a mortgage loan. Lenders determine pre-approval amounts based on your income and credit report, and they don’t factor in how much you spend on daycare, insurance, groceries, or fuel. Rather than purchase a more expensive house because the lender says you can, be smart and keep your housing expense within your means.
5. Decide What Type of Mortgage that’s Right for You
The variety of mortgage products available in the UK may be overwhelming to those unfamiliar with mortgages. The two main types of mortgages in the UK are the fixed-rate and variable mortgages. There are also a few specialist types for different circumstances.
If you do not understand these differences, you could be missing out on some good offers.
In my subsequent posts, I will write about the types of mortgages in the UK and their differences. In the meantime, I hope that you now understand these 5 practical ways to get a home mortgage loan and buy your home.
Remember, you must;
- Know Your Credit Score
- Save up
- Pay up your debt and avoid new debt
- Know what you can afford
- Know the type of mortgage that’s right for you.
And lastly, as a bonus, seek an advisor’s opinion. Just as you’re an expert at your work, so are there property investors like me who can help you.
Do you have questions or do you need help with getting a mortgage loan in the UK?
Let me help you.
Thank you for sharing these invaluable insights.