What you need to think about before applying for your first mortgage

Are your finances under control? And how much can you afford for a deposit?

To get the best deal you need to make sure your money is in order. The better your credit rating and bigger your deposit, the more options you will have when looking for a good mortgage deal.
Your first move should be to carry out a simple credit search on yourself, this will let you see what lenders will be looking at when they consider you.

New rules ushered in on April 26 also mean that lenders will have to carry out stricter checks on borrowers and carry more responsibility for their actions.

The first is the official shift from old-fashioned salary multiple lending to affordability calculations, but in reality many lenders have been pushing this since the financial crisis.
This means weighing up your essential spending, alongside your income and asking questions about your outgoings. A mortgage lender will look at the gap between what you have to spend each month and what you have coming in – and then do its sums from that.
So expect to be quizzed on habitual spending on things like feeding the family, childcare, a car loan, your energy bills and even a mobile phone or gym contract. Mortgage lenders won’t just have to assess your mortgage’s affordability now, they will also need to take a stab at working out what will happen to you in the future and stress test for theoretical interest rate rises. It will also not be enough simply to tell the lender or adviser about these things, you will need to provide documentary evidence of regular outgoings and what they set you back.

The second big change involves the fact that almost all mortgage sales must now be advised, so to get one will require a conversation with either a qualified mortgage broker’s adviser, or if you go direct the bank or building society’s own financial advice team.

So before you apply for a mortgage get all your finances in order, all the paperwork you need together and have details and figures on things like earnings and outgoings to hand.

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