02 December 2019
Get finance fit for 2020
If you’re thinking 2020 is going to be the year you take the plunge into home ownership, it’s a good idea to get your finances in shape before you come to start your home search.
Checking your finances
Whether you’re starting your savings account to build a deposit for your new home, or you're seriously starting your home search in the new year, you should check on your finances before you start.
With buying a new home comes many costs, including your deposit, solicitor’s fees, stamp duty and removal costs. When checking your finances, make sure the costs cover all the costs included. So, with the extra costs added on, making sure your finances are in shape is even more important. You can check the costs of buying a new home here.
Why should I check them before 2020?
Checking your finances will mean you can filter your home search accordingly. You can search for a home that's the right price and right property type for you, with your finances in mind so you don't look at properties that aren't suitable.
Making sure you understand your finances and the position you're in will come to help you when seeking financial advice too.
What does mortgage fit mean?
Being mortgage fit means you’re in the best possible position to get a mortgage. So, everything from having your deposit at the ready to having extra savings ready for legal fees and stamp duty means you’ll be likely to qualify for a mortgage.
Getting a mortgage is all about how reliable you are as a buyer, so the more prepared you are financially, the smoother things will run when you come to take out a mortgage.
What will lenders be looking for?
When taking out a mortgage, your mortgage lender will ultimately be looking for a reliable buyer who can meet all the re-payments when they’re due. Having extra savings just in case of changes in your mortgage payments helps, and makes you a more ‘attractive’ buyer.
Mortgage lenders will look at your credit score, which shows how reliable you are when making re-payments. If you have a bad credit score but you’ve found your dream home, you might not qualify for a mortgage, which will mean you’ll miss out on bagsying your dream home. If you have a bad credit score, there are a number of ways you can improve it. Read them here.
They will look at your overall financial track record and assess whether you’re likely to meet regular re-payments. How you have handled credit in the past will be looked at, all in order to ensure you are reliable enough to lend to.
Make sure you've got some proof of income at the ready too. Usually, lenders will ask for 3 months worth of bank statements and payslips as evidence of income. If you're self employed will look at the adjusted gross income on your tax return to see if your business is making money.
Getting the right mortgage type for you
Once you’ve checked your finances, you’ll have more of an idea of the kind of property you can afford, and also what home ownership option is best for your situation.
Here at Space Homes we offer a range of buying options to make stepping on the property ladder easier and more affordable for home-buyers. If you opt for one of our home buying options, you might have an alternative mortgage type, such as a Shared Ownership mortgage.
Seeking advice from a mortgage advisor is the best way to get professional advice from an expert about which mortgage is best for you. They will be able to assess your financial situation and give you advice on what mortgage deal will work best for you. Read more on mortgage advisors here.
Being financially ‘attractive’
This means being in the best position possible when it comes to getting your mortgage. It’s not just about having the best financial situation, it’s about knowing and understanding your finances so you don’t sign up to a mortgage that doesn’t suit you. Knowing your financial situation will also help you when searching for a home, as you’ll be able to search for a home within the remit that you can afford.
If you don’t know your financial situation, you may fall into a trap of searching for homes that aren’t right for you, or aren’t within your affordability at the time.
Top tips for being financially attractive to a lender
Credit score – You can check yourcredit score for free online. First check it, if it's good, then great! You're in a good position and you don't have to worry about working on it to improve it. If it's bad, you have a right to do something about it. Checking your credit score before applying for a mortgage will give you time to improve it if you need to.
Register to vote - There is no point having good credit unless you're on the electoral roll. Lenders use electoral data when carrying out an identity check. You can register on the electoral roll for free with your local council, so why not get registered and tick it off your list?
Disposable income – Lenders and financial advisors will look at your outgoings. Not just rent, insurance and credit cards, but what you do with your disposable income too. It’s a good idea to make the most of your disposable income by cutting unnecessary spending habits. This way you can maximise the potential of your disposable income and put any left overs into a savings account.
Evidence of payslips – Lenders will look at your payslips and bank statements to check your income and outgoings. Make sure you have at least 3 months’ worth so you’re prepared for them to take a look.
Check your accounts – Whether you’re going into a single or joint mortgage, check all your accounts including current account, savings and credit cards. Make sure you close any old or unused accounts and with the ones that are active, make sure your details are up to date.