News about mortgages is unavoidable these days. Whether youíre being bombarded with the latest deals or showered with news about falling rates, the chances are that mortgages are going to be on your mind in one way or another. But taking out a mortgage isnít as simple as just picking the best deal and immediately borrowing at great rates ñ there are always obstacles (financial and otherwise) in the way.
If youíre looking for a mortgage on a new house, then this quick five step guide will help you overcome the hurdles that stand in the way of the attractive new deals that are constantly on offer.
1. Finding out if you can get a mortgage
First things first ñ youíll want to make sure youíre actually eligible to take out a mortgage in the first place.
Since the financial crash of 2008, lenders have tightened up their regulations and conditions on borrowers. Previously, a borrower could get a mortgage just by showing the lender a payslip and having its value multiplied by a certain amount.
Nowadays, banks and building societies take into account all regular income and expenditure in order to work out exactly how much a customer can afford to borrow and reasonably be expected to pay back.
Affordability based lending, as this practise is known, involves a significantly more intensive application process than had been used previously and this means that more people are being refused mortgages than had been before, particularly in the early 2000s.
The important thing is to go through all of your finances to prepare yourself for the application and interview that youíll have to undergo before youíre allowed to borrow. This will involve calculating your monthly outgoings as well and checking your credit rating ñ lenders will want proof of your ability to pay back any loans.
2. Looking in the right place
While bigger banks will bombard the general public with adverts about new mortgage deals on the television, internet and billboards, this doesnít necessarily mean that borrowing from them is the best idea.
These days, more and more smaller banks and building societies are actually offering the best deals on the market, and so itís really important to hunt around before settling.
Often the best deals will be found online and with the rise of internet and mobile banking, you can reasonably expect to take advantage of the best mortgage deals without ever actually entering a branch.
3. Working out the best deals
In general, mortgage lenders will provide financial advice alongside their actual mortgage products ñ if so itís a good idea to take them up on this and listen carefully. A good mortgage adviser can be an invaluable resource if you want to make sure youíre getting the best deal that you can afford.
There are various aspects of each mortgage deal to consider before choosing one ñ namely the deposit and the interest costs.
The size of the deposit you have to pay up front will be dependent on various factors like your credit score and, of course, how much spare cash you have stored away, but it will also influence the amount you have to borrow and the rate of interest charged on your repayments.
Head over to our mortgage guide section to get more information on the relationship between deposits and interest rates, as well as to read up about the various government schemes available, like Help to Buy, that exist to help those struggling to make up the deposits necessary in order to take advantage of the best deals around.
Itís also important to take note of any added fees the mortgage lender is likely to charge you when you want to borrow. From application costs to processing fees, you could find that the deal youíre after isnít quite as attractive as it once seemed when you realise how much extra youíll be charge for taking it out.
4. Preparing for a mortgage interview
The mortgage interview is perhaps one of the most stressful aspects of the whole application process ñ youíll be asked about your financial situation in a manner not dissimilar to a job interview so that the lender can be absolutely certain that you are a viable candidate for borrowing.
So the best thing you can do here is to go through your finances, getting everything in order, using an accountant or other kind of financial adviser if needs be, so that youíre ready for any question they throw at you. You shouldnít be too worried though, youíre not going to be torn to shreds in an Apprentice style grilling, so long as youíve got all your paperwork prepared and have no gaping financial discrepancies, you should be just fine.
5. Credit ratings
Your credit rating is very important when it comes to taking out a mortgage. Not only will the amount youíre able to borrow compared to the deposit you have to pay be based on your credit score, but having a particularly bad one may even stop you from being able to borrow altogether.
The lender will want proof of your ability to borrow money and pay it back on time consistently and a good credit history is exactly that.
It is important to note that while obvious things like late loan repayments will make your credit score worse, the same applies if youíve taken out no credit at all. Of course, not having taken out a loan will have less of an adverse effect on your credit history than not paying back one you did take out, but the best thing you can do is to borrow money and pay it back on time.
There are various ways you can check your credit score by contacting various credit agencies like Experian and CallCredit and itís crucial to do so if you want to really take advantage of the best mortgage deals available.
Find a suitable and affordable mortgage with MoneyExpert.