Some people are afraid to apply for mortgages because they think their credit history will prevent them from being approved. Restricted lending has affected first-time buyers in particular. UK residents are not unjustified in their worrying because many are not approved by various lenders.
Knowing how a lender calculates whether people can afford mortgage loans can improve the chances of approval.
Lenders do not advertise the secrets behind their calculations, which is why people consult a mortgage broker. This professional advises clients about things like a five percent deposit for a first-time buyer with no debts. Currently, Skipton and Nationwide building societies and Yorkshire Bank are some of the only lenders dealing in this market, which has few options.
Borrowers with no credit history may have problems even with these lenders. Even if a first-time borrower can make a large deposit, he or she is often rejected. The individual should have worked for an employer for at least two years and have a credit history featuring no repayment issues.
Some first-time buyers are working around hurdles by purchasing homes on a shared equity basis, where a local housing association, developer, or authority covers a portion of the loan.
Someone planning a family should secure a mortgage prior to starting down this path. If a borrower has a non-earning partner or children, lenders tend to reduce the maximum loan amount. To make monthly payments lower, borrowers can extend mortgage terms up to 40 years, which lenders may view as less risky.
At least one year of saving into an Isa or endowment is usually required for an interest-only borrower. This money serves as funds for repaying the mortgage. Contributions should continue during the time the mortgage is held because lenders may check on this.
The desired loan-to-value ratio is important and is usually capped at 75 percent.