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What you need in order to take out a mortgage

Buying a property is likely to be the biggest financial decision you’ll ever make, and it can feel overwhelming – especially for a first-time buyer! However, getting a foot on the property ladder is easier the more prepared you are. So, if you’re taking the plunge, here’s what you’ll need to have in order first…

A deposit

First and foremost, to get a mortgage, you’ll need a deposit. The amount that you’ll need is worked out as a percentage of the value of the house that you’re hoping to buy, and the mortgage – the amount that you’re borrowing – is based off what’s left. The largest mortgages on the market are 95 per cent mortgages, meaning that you would only need a five per cent deposit. However, the lowest interest rates only become available with larger deposits, so the recommended deposit is 20 per cent.

There are schemes available, such as Help to Buy, which can help first-time buyers get a house with just a five per cent deposit, so it’s worth checking if you are eligible.

Your credit report

When it comes to get a mortgage, your credit score is important. Lenders use the information on your credit report to figure out how reliable you have been at repaying debt – from this, lenders can predict how you might behave in the future. Your credit history can also impact the interest rate of your mortgage, as some introductory rates or particularly attractive offers are only available for those with strong credit ratings.

If you don’t have a credit history, it can make things harder, as lenders have no way of knowing if you are a responsible borrower. There are still products available in these instances, but it may not be the type of mortgage you were looking for, so it may be a good idea to find ways of building your credit history before applying.

Documents

You’ll need to have up-to-date documents handy to prove your identity, address and income. The specific documents that you will need depend on each lender’s requirements, but it’s useful to make sure you have to hand:

  • A valid, in-date passport
  • A driving license with your current address
  • A council tax statement, utility bills or bank statements as proof of address
  • Your latest payslips from the past three months
  • Your P60
  • Accounts statements from the past two to three years and a tax return SA302 form if you are self-employed.

You may also need to show proof of your outgoings, such as utility bills, council tax, credit card or loan repayments and general living costs.

Budget for extra costs

As well as your deposit, you’ll need to make sure you have enough money saved to cover the upfront costs that come alongside buying a house. Stamp duty – a government tax that needs to be paid on houses that cost more than £125,000. Some lenders charge valuation fees to assess the value of the property to decide how much they are willing to lend, and you’ll need a solicitor or conveyor to carry out legal work.

Remember that if you apply for a mortgage and get refused, it can leave a mark on your credit history, so it’s important to get it right the first time. We scour the market to find the best mortgage deal for you, and handle all of the paperwork – we’re here to make applying for a mortgage as easy as possible, so why not get in touch with our advisers?

Maxim Cohen

Chief Executive

“Getting a foot on the ladder is easier the more prepared you are"

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