Following the ‘Mortgage Market Review’, lenders now have to be more careful about who they lend money to. It means that any mortgage provider must look at your income AND expenses when they are working out whether or not you could afford the repayments on a mortgage.
A lender won’t just look at your income, they will consider expenses like childcare costs, car loans, and even your gym membership while they work out if you can meet the monthly repayments. Don’t assume that because you can afford the mortgage repayments, you can definitely get a mortgage. Lenders have to apply ‘stress tests’ to check their customers could afford the repayments even if interest rates began to climb again.
On top of that, a lender will consider your credit worthiness – whether you’ve handled credit responsibly in the past, whether you’ve proven you are a safe bet with debt, whether you’ve ever missed any repayments or had any County Court Judgements (CCJs) made against you.
If you’re a first-time buyer then don’t panic. None of this is meant to put you off - there are steps you can take to make it less likely your credit history or circumstances will harm your mortgage application. What matters is that the sooner you start acting to defuse the risk, the more likely your application is to go without a hitch.
Here’s an overview of what might harm your application and how what you can do to improve your chances of your application being successful.