Getting a mortgage can be one of the most exciting milestones we will experience in our lives. There’s a lot to prepare and jargon to break, not to mention money to save.
Knowledge is definitely power, but with so much information, knowing what questions to ask can be overwhelming.
For some answers, we’re putting mortgage questions from our Cosmopolitan Home Made Housemates and Money Makeover Facebook group to mortgage advisor and expert Katie Crosby.
Here’s what you need to know before making your mortgage application.
“How should I prepare for a mortgage application?”
Before you even think about applying for a mortgage, you need to know where your financial history is.
“I always ask my customers to get a copy of their credit report showing how well they are paying off debts. There are many credit bureaus that will get your report and many offer the service for free, ”says Katie. Missed payments, such as phone bills or loyalty cards, and student loans can show up on your records but will not negatively affect your credit score, although they can be taken into account when assessing your affordability (how much you can afford back per month).
“In general, lenders require three months of pay slips and three months of bank statements and proof of your deposit,” she adds.
While it can be difficult to gather all of these documents together, the NatWest mortgage application is paperless and stores all submitted and signed documents in one place as well as an application tracker. You can also chat with a mortgage advisor online without leaving your bedroom, which means mortgage advice is just a few clicks away.
“Can I take out a mortgage if I have district court judgments on my file?”
District court rulings that can be issued when you have unpaid bills or fines can hurt your options, but shouldn’t stop you from taking out a mortgage if you can show that you can fix any problems. Your best option is to settle all CCJs before applying for a mortgage, but if you can’t, options are available.
“Some lenders specialize in mortgages for customers who have had negative credit ratings in the past, so this could be a good option to look at. However, the interest rates with these lenders are generally higher than the average high street lender would offer, ”says Katie.
“What are the advantages of a 95% mortgage?”
The 95% mortgage has made headlines lately, but we don’t blame you for wondering what it is and why it might be an option for you.
“The 95% mortgage is available on properties up to £ 600,000 worth and requires a lower down payment (5%) than other mortgages. This is to address the problem that many first-time buyers feel that saving for a deposit while renting is impossible. A 95 percent mortgage allows people to move up the real estate ladder earlier and pay their own mortgage instead of their landlord’s, ”added Katie.
If you want to learn more about the 95% mortgage, check out NatWest’s handy guide here.
“My bank knows my financial history – should I still look for a mortgage?”
While loyalty may be an admirable quality in life, not so much in finance. “If you don’t meet current mortgage criteria or affordability, the fact that you do banking with them doesn’t make any difference. It is always best to look around to get the best price for you. If you use a mortgage broker who has access to many different lenders and hundreds of different offers, you will often get a much better deal.
“A realtor takes your information and does all the searching and hard work for you, focusing on getting a mortgage application that is likely to get you approved,” added Katie.
“Is a fixed-rate mortgage better than a variable option?”
There are two types of installments to consider when looking for a mortgage. A fixed rate mortgage bears a fixed rate of interest for the agreed period of time, which can be higher or lower than the Bank of England base rate. A variable mortgage will vary alongside this base rate.
“A fixed-rate mortgage is great because you can budget for the time period you specify. However, you are bound by this deal until it is completed. If you decide to end this deal early, expect an early repayment fee, ”warns Katie.
“While you typically get a higher interest rate the longer you lock in your mortgage, you are paying for the long-term assurance that your mortgage repayment rates won’t skyrocket for that set period of time.”
Next step: Save those pennies and get on the property ladder!
Ready to start the process? NatWest could help you find your first home
95% Mortgages – Exclusions and eligibility criteria apply. Backed by the UK Government’s Mortgage Guarantee System
Your home can be repossessed if you fail to pay off your mortgage
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