Just like everyone is a unique and precious snowflake, every property and mortgage is unique. So sometimes what you need to get a mortgage will be different for each person and each property. But below I’ve attempted to answer the question ‘What do I need to get a mortgage?’.
This is kind of useful, but let’s start off with the basics eh. You’ll need something to put up as security for this big loan you’re asking for. Whether it’s a 3-bed semi-detached, a 1-bed flat, or a 14-bed castle. It doesn’t matter.
In order to get a first time buyer mortgage, you need something that the mortgage lender can place a charge against. All this means, is if you stop paying your mortgage, they have the option to take the property off you and sell it in order to get their money back.
To qualify as a good property for a lender, it generally needs to be freehold or leasehold (with a decent length lease), have a kitchen and a bathroom, be over 30 sqm (this varies with lenders), and not be made out of anything daft like twiglets.
Lenders prefer “standard construction”, which is bricks and slate to most of us. But there are lenders out there that will consider the weird and wonderful.
You’ll also need something called ‘Good title’, which I’ll leave for the solicitors, but it just means that the property doesn’t have anything weird attached to it, legally speaking.
Shouldn’t come as a huge surprise that someone lending you a bucketful of money will want you to have some way of paying it back.
You can have a normal 9-5 job, or be self-employed, or even retired sometimes. Some lenders will take into consideration state benefits as well. But they want to make sure you have some kind of income stream that will make it possible for you to give them their money back.
For self-employed people, the ideal is for 3 years’ worth of accounts. However, there are lenders out there that will take 2 or even 1 years’ worth of accounts. You make it harder for me if you’ve made a loss in the last couple of years, so keep an eye on that.
Most of the time when you a buy a house, you put some money in yourself and get the rest via a mortgage. That’s known as the LTV or loan to value.
There was a time when you didn’t even need a deposit, but nowadays as a first-time buyer you’ll need at least 5% of the purchase price as a deposit.
If you’re an investor, then that’s more like 15%. But don’t forget the other costs involved too. Keep money aside for stamp duty (maybe not if you’re a first-time buyer) and arrangement fees.
Finger in the air, I’d say most people are going to need at least £10,000 to buy their first house.
Sounds weird I know, but to get a mortgage the lenders are going to want to know where you’ve been for the last 3 years. The logic behind this is they can carry out a credit check on you to make sure you’ve not got any debts you’re not declaring.
Another option is they want to see if you’re on the run from the police.
Third option, just to see that you’re a stable person that they can lend money to. It doesn’t hugely matter how many addresses you’ve lived in (I mean it’s ideal if it’s just one, but still), the lender needs to know each address you’ve lived in for the last 3 years.
It’s important therefore to keep your credit file up to date. When you move house, don’t leave loads of things in the last address or leave everything in your Mam and Dad’s address. Have utility bills at your address, credit and bank accounts at your address, be on the electoral roll at the address.
These things add up to build a picture that you aren’t homeless and you can be trusted to stay put.
Good Credit… ish
I’d recommend this for the previous point as well, but wanted to save it for this one.
Get yourself a copy of your credit file!
I like Noddle.co.uk. It’s free and updates you monthly, but there are others out there too. You can at least sign up for a trial account, so it shouldn’t cost you anything.
Knowing what makes up your credit score is important as this is the document that lenders will look at when they are reviewing you. So check if there is anything on there that you don’t recognise.
Might be a rogue bank account you’ve forgotten about that’s registered to an old address. Might be the phone contract you got when you were 23 and forgot about. That might now be ruining your credit file if you didn’t pay the bill for a month or two before it cancelled.
Now there are lenders out there that don’t mind SOOOO much about your credit file. But the better your credit rating, the cheaper the mortgage is going to be for you. So check yours out, and look for ways to improve it.
There are as I say a bunch of other things that will come into play when you’re applying for a first time buyer mortgage. Certain documents that lenders will require, but it will vary for each person. Hopefully the above has given you the main points you need to consider and some background as to why it’s important.
From a pure documentation perspective, the below is usually enough information needed by 95% of my customers.
- Drivers Licence
- Utility bill (dated within 3 months)
- Employed – Last 3 months Payslips
- Self-employed – 3 years Tax Year Overviews & Online Tax Calculations
- Last 3 months Bank statements
- Proof of deposit
- Credit report
So when it’s time to start thinking about your mortgage, start getting these documents together.