Top Tips – Things You Need know, to get yourself Pre-approved for a Mortgage

When you are thinking about buying your home it is a very exciting time, but it can also be a stressful one too. There are certain things to consider such as deposit amounts, fees, mortgage approval (a Mortgage Agreement in Principle). This article is a basic guide to help you and focuses on 5 things that you need to organize / arrange to help you get your mortgage approved and buy your new home.

Things You Need To Get Yourself Pre Approved For a Mortgage

Proof of your Income

You will no doubt be aware that you will need to produce recent wage slips if employed or tax calculations and overviews, if self-employed. The lender will want review and assess your income to ensure that the mortgage you need is affordable.

Top Tip – ensure that you can prove your income and have either your last 3 months pay slips and P60 available. Or is self Employed ideally 2 years tax calculations and overviews. Have your last 3 months pay-slips or tax calculations and overviews to hand before you apply.

Proof of Deposit

As a borrower, you will need a deposit to purchase your home. Typically, a minimum deposit of 5% would be needed (as a minimum). However, within the Covid 19 Pandemic, many lenders increased their minimum to 10 or even 15%. It is worth noting that the larger the % deposit generally the lower the interest rates on offer from the lenders.

Lenders will also accept gifted deposits from close family members, who would like to help you get on the property ladder.

Top Tip – be able to prove your deposit and where it has come from. All deposit funds will need to be verified from where the funds are coming from and who, so you will be asked to provide evidence of where the deposit has come from and identify the people gifting the money.

Your Credit Rating / Profile

The credit profile of all borrower(s) will usually be considered. However, this is dependent on the lender, most high street lenders will generally require your credit profile to be in good order. If your credit score has been affected by missed or late payments, defaults or    CCJs it is likely that you will not be accepted by high street lenders and you may need to approach a more specialist lender.

Top Tip – the higher your score, the better your chances of borrowing success. So, it is important to ensure that you maintain a good credit profile. Generally, the better you credit profile the more likely you are to gain a mortgage and potentially a lower interest rate. Register yourself with a credit reference agency, review your profile, correct any errors and work on improving your status (if needed).

signing documents for a new home

Employment

Lenders want to ensure that any mortgage offered is affordable both now and in the future. Stability of employment and income, as well as not trying to overstretch your borrowing requirements will assist in gaining your mortgage approval. This applies to both employed and self-employed mortgage applicants.

Lenders will generally be sceptical of 2nd jobs, especially where the new job has only been taken on recently. A short term 2nd job can be viewed by the lender as “staged Income”, meaning that the lender may suspect that a job has only be taken on to try and improve the size of the mortgage loan available.

Self-employed applicants will with most lender be required to provide 2 years tax calculations and overviews. So, you will generally have had to submit 2 years of Tax Assessments. There are though a few lenders who may consider 1 years of confirmed figures.

Top Tip – be realistic about how much you want to borrow. Lenders affordability calculations differ greatly, therefore speaking with My Mortgage & Protection Experts and getting them to confirm your maximum loan will put you in a more informed position.

Other Documentation

Other documentation will also be required, such as proof of identity and proof of address. A valid in date passport or Driving License are ideal, make sure the documents are valid.

Make sure that you are registered on the voter’s role where you live. Also, make sure that things like your driving license have your latest address on as well as other household bills.

Top Tip – make sure your ID and Proof of Address are in date. Proof of address supplied to support a mortgage application will be required to be dated within 3 months of the application. Get organised and have all your documents to hand prior to arranging your mortgage.

Typical Supporting Documents Required (per applicant, where applicable)

  • Latest 3 Months Bank Statements
  • Latest 3 month Pay Slips or 2 years Tax Calculations & Overviews (if self-employed)
  • Proof of your address (typically a household bill)
  • Proof of your Identity (Passport or Photocard Driving License)
  • Proof of Deposit Funds

Ultimately, if you have everything that the lender requires, and you are in a strong, solid situation financially, you have a good chance of getting your mortgage Agreed in Principle.

 Top Tip – get organised and get all you required documentation ready.

Final Top Tip – review all the Top Tips, get your documents organised and available. Then speak with a professional mortgage broker like My Mortgage & Protection Experts Ltd. A professional broker will be able to guide you on a wide range of lenders, meaning you get access to a wider range of products and rates. Equally all lenders have different lending criteria and affordability calculations. Speaking to us could improve your chances of getting the mortgage require.

If you would like to find out more about mortgages for you or would like to find the best mortgage deal for you, contact us today on 03300 949 409, or visit our mortgage calculator.

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Residential Property Review – March 2021

Stamp Duty holiday extension

In his Budget on 3 March, Chancellor Rishi Sunak confirmed an extension to the Stamp Duty holiday in England and Northern Ireland. Rather than ending on 31 March, as originally announced, the nil-rate threshold for Stamp Duty will remain at £500,000 until 30 June.

The extension means that buyers will save a maximum of £15,000 and an average of £4,500 each, if they complete their property purchase by the end of June.

To avoid a sudden cliff-edge, the tax will then taper to £250,000 until 30 September, before returning to £125,000. This means that those who finalise a property purchase between 1 July and 30 September will save up to £2,500 each. According to Zoopla, ‘the tapering move by the Chancellor means that nearly half of sales in England will be free of Stamp Duty. Last year, some 46% of all home sales were for properties of up to £250,000.’

The threshold for first time buyers will remain at £300,000. In Scotland, the LBTT holiday is due to end on 31 March and in Wales, the £250,000 LTT threshold will revert to £180,000 on 1 July.

Mortgage guarantee scheme set to launch

The government has pledged support to more people who want to buy a property with a smaller deposit by launching a new mortgage guarantee scheme.

The initiative, available to both first-time buyers and home movers, will be available from April and will run until 31 December 2022, operating in a similar way to the previous Help to Buy mortgage guarantee scheme. The scheme is available on properties up to £600,000.

The aim of the scheme is to increase the availability of 95% loan-to-value (LTV) mortgages, by allowing lenders to purchase insurance from the government to cover some of their losses if the property is repossessed, thereby reducing the associated risks of this type of lending.

A number of lenders, including Lloyds, NatWest, Santander, Barclays and HSBC have already signed up to the scheme.

Richard Donnell, research director at Zoopla, commented on the scheme, “Our analysis shows the scheme will have the greatest benefits for buyers in lower value housing markets in northern England and Scotland where a 95% mortgage is more attainable.”

Strongest spring housing market for a decade

According to Rightmove, the excess of buyer demand over supply is the largest seen in the last 10 years, which, it is suggested, could see one of the best-ever Easter periods for sellers.

In February, Rightmove recorded seven million online visits a day, which is an increase of 40% from February 2020. In addition, the number of sales agreed for the first week of March were 12% higher than a year ago, despite fewer properties coming to market and almost two out of three properties currently on estate agents’ books are currently sold, subject to contract.

Tim Bannister, Rightmove’s housing market expert said, “So many sales have been agreed in recent months that we now face a serious shortage of homes available for sale. There are lots of reasons why many homeowners have hesitated to come to market during the first two months of the year, but these do now seem to be dissipating.”

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Residential Property Review – February 2021

House Price Growth Slows

Several recent reports have confirmed that house price growth is slowing, but there are reasons to believe that the housing market will be more stable than last year.

According to Knight Frank, the third lockdown and the imminent end of the Stamp Duty holiday have played a major part in delaying a certain amount of activity until the spring, which could result in some short-term downward pressure on prices, as more sellers come to the market at the same time. Over the course of the year, Knight Frank expects prices to remain flat and for there to be steady, seasonal demand after the summer as the vaccination rollout nears completion.

In January’s ‘UK Residential Market Survey’, the Royal Institution of Chartered Surveyors (RICS) expects all UK regions will see prices rise to some degree over the next twelve months, with Northern Ireland, Wales and Scotland expected to see the highest rises.

Nationwide’s Chief Economist Robert Gardner commented on the rate of growth, “The slowdown probably reflects a tapering of demand ahead of the end of the Stamp Duty holiday.”

Nearly 750,000 buyers benefit from Stamp Duty holiday

Almost three-quarters of a million homebuyers are in line to benefit from the Stamp Duty tax break, assuming they beat the 31 March completion deadline. This represents total savings of almost £5bn.

The analysis, from Zoopla, is broken down further; 600,000 buyers will not pay any Stamp Duty, which is an average saving of £4,660 each or £2.8bn in total. A further 140,500 people whose homes cost over £500,000 are set to benefit from a Stamp Duty reduction and will save £15,000 each or £2.1bn collectively. This latter group will still have to pay tax on the portion of the property value above £500,000.

Rightmove have reported rumours that the tax break may be extended in England and Northern Ireland by a further six weeks. If this were to be the case, Rightmove estimate that between 120,000 and 160,000 extra property transactions in England could benefit.  

Property Data Expert at Rightmove, Tim Bannister commented “If there was a six week extension it should give the majority of the sales from last year the chance to complete in time”     

Regional variations in values of family homes

After three lockdowns and an increase in those working from home, many people have been reassessing their housing priorities.

Research by Zoopla has looked into which regions have seen the biggest jump in values of three to five-bedroom houses, finding that family homes in the Midlands have seen the biggest jump in value over the last four years. First place goes to East Midlands, with a sq ft price increase of 25.4%, or £43, to stand at £212. West Midlands takes second place, seeing a rise of 24.6% to reach £223.

Wales came third, with an increase of 23.6% per sq ft, followed by East of England (21.4%) and North West (21.3%).

London came ninth, with a percentage rise of only 14.6%, but unsurprisingly, also seeing the biggest monetary increase, with a jump of £71per sq ft to stand at an average £558.   

House Prices Headline Statistics
House Prices Price Change By Region
Average Monthly Price By Property Type - December 2020
The House Market And The Economy
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Contains HM Land Registry data © Crown copyright and database right 2017. This data is licensed under the Open Government Licence v3.0.

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

2021 Spring Budget

We have sought to pick out all the key points from the Spring Budget on 3 March, including:

Economic forecasts

COVID-19 support measures

Personal taxation, wages and pensions

Business taxes

Housing

Environment and ‘Help to Grow’ initiatives

Other key points

Closing comments

We do hope that you find this update both interesting and informative. Should you have any queries or require more information on any of the areas covered or any other financial matter, please do not hesitate to contact us.