If you’re preparing to put in an application for a mortgage, especially as a first time buyer, it’s important that you’re prepared for the questions which they’ll ask you. Of course, if you’re using the services of a mortgage broker, it will be them who ask this information, however regardless of the route you’re taking to apply for your mortgage, it’s important that you’ve prepared answers and know how to respond, in detail, to certain questions.
As such, we asked David, our leading Manchester based mortgage broker, to outline six commonly asked questions by mortgage lenders.
1. How Much Do You Want To Borrow?
If you’re at the stage of putting in a full application for a mortgage, you should have a good idea as to the price of the property you’re looking to buy and, as such, know how much you’re wanting to borrow. This is perhaps the most important question to have an answer to as, without knowing this, a lender is unable to give a decision. They’ll want to know, almost to the exact figure how much you’re asking to borrow – not the price of your property (of course, your deposit needs to cover the difference between the property price and your mortgage unless you’re looking at using the Help To Buy Scheme or similar).
2. What Is The Size Of Your Deposit?
Whilst it’s certainly possible to get a mortgage with only a 5% deposit, it’s a widely known fact that the bigger your deposit, the lower rate of interest you’ll be able to find. It’s important that you know, at the time of your application, how much you have to put down as a deposit. Don’t be tempted to over exaggerate this and rely on money you may have in a month’s time – be honest, upfront and state how much you have available. Are you flexible? Maybe you’re wanting to put down a 5% deposit and use the remainder of your savings to furnish the house, however if you’ve got a healthy amount in the bank, could you stretch to 7.5% or even 10% if it came to it? It’s important that you know and have made these decisions before putting in your application. Remember, the larger your deposit, the lower your monthly repayments will be.
3. Where Did Your Deposit Come From?
Whilst you may not think it matters where your deposit has come from, lenders WILL ask the question as they look more favourably on those who have saved up their own rather than it being gifted. Of course, that’s not to say you’ll be rejected if you’ve had a deposit gifted but, again, honesty is the key. Those who have saved up a deposit are already showing a degree of money management to the lenders, hence why it’s looked upon so favourably.
One thing to note here is that you’ll be required to provide your conveyancing solicitor with evidence as to how you earned the deposit with it being a legal requirement to check for money laundering.
4. What Is Your Annual Income?
Lenders will want to know your pre-tax income each year and to see evidence. If you’re applying as an individual, that’s your personal income, if you’re applying as a couple or in joint names, that’s the joint income.
If you have other earnings coming in such as bonuses, overtime, commission, second jobs or any other form of income, be sure to document these as well as it can showcase a higher income if fairly stable.
Having information available with supporting documentation in the form of pay slips, P60’s and bank statements will ensure no delays are experienced.
5. What Are Your Monthly Outgoings & Any Other Financial Commitments?
Lenders will want to know how much you spend each month and what on! Knowing how much you spend is key to working out affordability for mortgage repayments and, as such, you’ll need to provide evidence usually in the form of bank statements. In most instances, you’ll be asked to justify and explain large outgoings over a certain amount.
Of course, lenders will also want to know any other financial commitments you have such as credit card balances, car loans, personal loans or other forms of borrowing. Please note, student loans are NOT taken into account here and do not count as a debt for this purpose.
If at all possible, try to become debt free before applying for a mortgage.
6. What Is Your Employment Status?
Lenders will want to know how you earn your income! It’s all well and good showcasing your annual income, however they’ll want to know where it came from and how stable your job is. Do you work full time? Part time? Are you self employer or perhaps a director of your own business?
In most cases, full-time employment is viewed as the most risk free however you’ll need to ensure you’re established in the job and that you’re not in a probationary period.
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At the end of the day, applying for a mortgage isn’t as difficult as it sounds in many cases, however by preparing for the questions they’ll almost certainly ask you on your application, you can be in a great position to offer honest answers alongside all the supporting documentation they’ll need to process it.
Don’t worry – we’re confident you’ll be a home owner in no time at all!