What conditions must be met to qualify for a mortgage in the UK?
You will smile corner to corner when your mortgage application is signed off on, but you are supposed to meet certain conditions. The mortgage is the most expensive debt, and therefore no lender can process the application as quickly as they do for small emergency loans like payday loans.
The deposit size you arrange must be at least 10% of the value of your house. However, you can increase the limit up to 20% or more if you manage to stow away this much despite arranging a bigger down payment, a lender's decision depends on your repaying capacity.
If you fail to prove that you are able to pay down your mortgage, they will straightaway turn down your application. Further, you are supposed to submit all necessary documents. Any discrepancies in your documents can also keep you from fulfilling your house fulfilled. This blog discusses the conditions that you need to qualify for a mortgage.
The appropriate size of down payment
A deposit size is a foremost condition to get qualified for a mortgage. The lending industry has set the trend of submitting at least 10% of the market value of the house as a down payment. A couple of lenders are out there that are a bit lenient and accept applications with a 5% deposit size but only when you are a first-time borrower, and you have a good credit score.
The size of the down
payment varies by mortgage borrower. For instance, if you have a bad credit
history, a lender would expect you to arrange a bigger deposit size. In most of
the cases, it is not less than 20%. It is always suggested to do some research
before applying for a mortgage. Contact a mortgage lender to know what minimum
down payment they expect from a borrower.
Here comes Mortgage in Principle (MIP), also known as Decision in Principle (DIP). In fact, most of the agents will take you seriously when you have an AIP. You could get it from a lender within a couple of minutes to know how much they would be able to lend you money if you were to buy a property. A lender would look over your income and credit history.
Some lenders run a soft credit check, while others run a hard credit check with your permission. Note that you may lose some credit points if hard inquiries are made. Knowing how much you will likely borrow will give you a clearer idea of the down payment size.
To avoid any complications, you must know how much money you are to pay down as a deposit size. If you apply for it through a broker, you can get all information without putting in much effort. The broker will do everything on your behalf in exchange for online mortgage advisor fees.
A consistent and stable income source
Another condition you need to meet to get the nod is a consistent and stable income source. If you cannot prove your repaying capacity, a lender will not approve your application regardless of the deposit size.
If you are a full-time employee, you will have to submit your pay slip for at least three months. However, this cannot be sufficient to convince a lender to prove your repaying capacity. Make sure that you have been the employee of the same company for over a year.
If you are running a
business, your monthly income may fluctuate, but you still should be able to
maintain a level. Make sure that your monthly profits are always above and
beyond that minimum level.
What documents do you need to apply for a mortgage loan in the UK?
Having an appropriate
size down payment and stable income source is not enough to be eligible for a
mortgage application. When you apply for a mortgage application, a lender will peruse
your credit file to get an idea of your past financial behaviour and afterwards
they would ask you to turn in income documents. Here are the documents you
should submit:
·
Proof
of benefits, if any
·
P60
form for your employer
·
Your
last 3 months’ payslips
·
Passport
or driving licence
·
Bank
statement of 3 to 6 months
·
Statement
of 2 to 3 years’ accounts of income if you are self-employed
·
SA302
form if you have earnings from more than one income source
·
Additional
information along with tax returns gives detail about your income if you are
self-employed.
Other things to remember to ensure the accuracy of your documents
Make sure you have
arranged all documents before filling in the application form. You can ask
about the documents required at the time of getting an AIP. Provide all
necessary information, complete your application, and submit documents to the
bank details you give. Follow the following tips on your mind when you provide
documents:
The final word
Qualifying for a mortgage is not that easy. You will have to prove your repaying capacity, and if you have a bad credit score, it can be more challenging and tougher. For instance, a lender could be stricter about the down payment size.
Further, you need to provide additional documents to prove your income. A lender can ask you to submit various documents to process the application. You should contact your mortgage lender to know about them, or you can get this information during DIP.
If you are applying to a mortgage broker in Edinburgh, you can get this information from them. They will ensure the accuracy of all of your documents, so your application is not cast aside because of the lack of documents needed.
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