What is the Best Mortgage for me?
Accessing the best mortgage rates and mortgage deals can feel a little traumatic these days. The times when banks and building societies would fight to get you in the door and throw a mortgage deal at you just to secure the mortgage deal with you are gone. Changes to financial regulations and stricter control and review by the FSA (Financial Conduct Authority) have made it more difficult for first time borrowers to secure their first mortgage though the safeguard rules and caveats introduced are there to protect you as the borrower.
The new mortgage regulations and control by the FSA have resulted in mortgage lenders defining very stringent lending criteria and enforcing compliance to those criteria rather than using them as a flexible benchmark for mortgage approval as was the common approach historically. Whilst this may concern you as a first time buyer you should also draw comfort from their being better protection and financial assessment for you during the mortgage process. This may seem like a bigger burden and take far more of your time to complete but it will mean that, once approved, you can be confident that you are financially prepared for your mortgage, transition to homeowner and are aware of any financial pitfalls that may occur.
The key to obtaining the best deal is with your financial preparation. The following factors will support your access to the best mortgages and increased mortgage approval chances.
- Good Credit Score: A good credit score is essential for securing any type of financial product. IF you don't know your credit score you can access a free credit score on noddle.
- Good Employment History: Being consistently employed by the same company for longer durations will support your application as longer employment suggests you have greater financial stability.
- Being employed: It is far easier to obtain a mortgage when you are employed rather than self-employed. You can still secure a good mortgage when you are self-employed but you will have to provide far more financial evidence and may find that some mortgage lenders simply won\'t touch you. If you are self-employed you are more likely to access better mortgage deals by using an Independent Financial Advisor or Mortgage Broker.
- Mortgage Deposit: As a first time buyer, the higher the mortgage deposit you have as a percentage of the property purchase price, the better your chances of accessing lower mortgage interest rates. The size of Mortgage deposit has the biggest impact on both the amount you can borrow and the mortgage interest rate. Use our mortgage deposit calculator to see how much you need to save and set aside for your mortgage deposit.
- Good Financial Stability: This includes having a good credit score, a history of repaying your loans, credit cards and other finance on time, being consistently in work and, ideally, having surplus spending money each month.
- Savings: Have savings plan above your mortgage deposit and being able to demonstrate that you are a regular saver will improve your mortgage opportunities. When completing a financial review of your spending habits and financial status, the mortgage lender will look more favourably on you if they believe you\'re are better prepared for unexpected financial occurrences. Adversely, if you normally need to borrow when something goes wrong as you have no spare cash or rainy day funds, it can count against you. A poor saving history won\'t stop you getting a mortgage but it will make it trickier and reduce your chances or accessing the best deals.
- Your address and history: Believe it or not, being on the electoral role and having an auditable address history will make it easier for you to get a mortgage. Why? These details are used by mortgage lenders when they complete a credit check on you. If their systems encounter challenges obtaining the data required, they can draw a blank and reduce your scoring. If in doubt, check your credit score as mentioned above, this should flag any anomalies in your address history.
- Credit Cards: Credit cards are great for securing a mortgage, you may be stunned by this but, if you have credit cards, use them and regularly pay off the balance your credit score will increase and mortgage lenders will have demonstrable evidence that you are managing your finances correctly. Having no credit cards or borrowing history will count against you.
- Prepare your budget: Mortgage lenders will analyse everything to do with your finances and make their mortgage affordability calculations based on your expendable income. If you have already worked out your monthly budget and assessed, you mortgage affordability it will increase your chances of obtaining the best mortgage for you given your financial situation.
Where to get the best mortgage deal
With your financial self-analysis and preparation done, it\'s time to hit the mortgage market.
Finding the best mortgage will now come down to some research, we suggest you set aside a couple of hours each week and start to review the mortgage market. Look at which lenders are offering which deals. Mortgage lenders are always looking to entice first time buyers as they love new business, they may make it difficult to get a mortgage but they do want you. You can use mortgage comparison websites to do this but also check their comparisons with the actual lenders website. Mortgage comparison websites can look great and simplify things but you must remember that they make a commission from their sales. This commission on mortgage sales may be hidden from you as the money transfers from the mortgage lender to the website owner but it is there. Mortgage comparison websites are great tools, just use them sensibly. We strongly suggest that, once you are comfortable with the rates and offers around that you talk to an Independent Financial Advisor or Mortgage Broker, yes you still pay for the services (once agreed, a consultation should be free) but their fees are clear and they have a duty of care to your, are regulated by the FCA and are duty bound to get you the best mortgage offer available.
Next: Understanding Mortgage Fees
Previous: How do I get a mortgage?