This is a tough time for people looking to get on the property ladder. A lack of supply of property coupled with rising prices of those available it really is tougher than ever before. Add on top of that the central bank rules on lending and a banking sector who are reluctant to completely jump in with buckets of cash and you have a cocktail that is going to guarantee a sore head.
But are their things you can do with your finances that can help you put your best foot forward when you apply for a mortgage. These are my top ten tips on getting yourself mortgage ready:
- Getting ready to get a mortgage starts years in advance not days, weeks or months.
- Avoid your overdraft facility, if possible cancel it altogether.
- Don’t miss payments, this extends to direct debits for things other than just loans. I once had a mortgage refused because the client missed their health insurance payment, once!
- Cancel your online betting account, even if you are a good at it! Banks don’t want you gambling with their money.
- Save! The best way to show a bank you can afford the monthly mortgage repayments is to save more than the monthly mortgage payments over a long period of time well before you get the mortgage.
- Rent and still save! Even if you are renting you should still be adding to it with savings. Between saving and renting you should be trying to prove to the bank you can afford about 1.2 times the monthly mortgage repayment.
- If you have loans you are going to need to try and clear them before drawing down the mortgage. But not necessarily before you apply for it.
- Get a pay rise. Employers love to see employees who are considering their long-term future, particularly if that long-term future includes working with them. Go ask your boss “What would I need to do to get a pay rise to X over the next few years.”
- Find out what X needs to be! Find out online what realistically it is you want to buy, Then find out how much of a mortgage you would need for that and then find out what your salary would need to be to get approved for that mortgage.
- Meet a mortgage broker now! Don’t wait until you need the mortgage, if you want to buy in the next few years go meet a broker now. Pay a fee if you must, but ask them to review your situation, give you guidance on what you need to do and a rough idea what you could borrow and how much savings you would need.
If you are self-employed there are some other pointers I would give you. If you want the bank to treat you as a professional act like a professional. That means you can’t run your business and your personal life from the same bank account. No banker wants to see your debit card transaction in the bar on Saturday night next to the income from your biggest client. Get a separate account, use the business account for just business and the personal accounts for just personal.
Secondly, as a self-employed person remember it is much harder for you to get a loan. You need to prove there is longevity in your business. This means you will need 2 or even 3 years accounts before you will be considered.
Lastly, even though your income may fluctuate month to month remember your mortgage payment won’t. Prove to the bank that you can afford to make payments every month by showing that you pay yourself the same minimum wage each month regardless of how well or badly the business is doing. Ideally do this by standing order for the minimum amount and then in good months when you are paying yourself a little extra then do a separate payment to yourself for your “bonus”.
- 3 recent payslips.
- Salary Certificate (you’ll get this from the broker and your employer fills it out).
- 6 months bank statements for all your bank accounts.
- 12 months statements on any loans you have.
- A recent credit card statement for any credit cards you have.
- Your passport or drivers licence.
- A recent utility bill (within 3 months and it can’t be a mobile phone bill).
- Something with your PPSN on it.
If you are self-employed you don’t need the first two but you need 3 years trading accounts and 3 years tax returns.