First time buyer: an introduction to mortgages
How many people can be on a mortgage?
The maximum number of people allowed on a mortgage is usually four. This is because a property deed only has space for four names.
When does a mortgage start?
Your mortgage will start on the date as agreed in your mortgage terms. Usually, your first mortgage payment is due on the first of the month after you complete and your mortgage starts.
How much will the bank lend me?
When deciding how much to lend you, mortgage lenders will look at your salary and monthly outgoings to make sure you can afford to keep up with the monthly repayments.
Banks will normally lend you between three to four-and-a-half times your annual salary in a mortgage offer. Read more about mortgage affordability.
What credit score is needed for a mortgage?
There isn’t a set score you need to have for banks to offer you a mortgage. All lenders are different.
Before they decide to make you an offer, a lender will check your financial history, along with other factors like salary, before deciding whether to offer you a mortgage.
While each lender has its own criteria, here are some things you can do now to make sure your credit profile, and therefore your mortgage application, is in the best shape possible.
- Register to vote
You need to be registered on the electoral roll so lenders can confirm your address and trace your credit history. If you’re not registered, the lender might not have enough information to progress your mortgage application. Contact your local authority to register or to check if you are registered.
- Be selective about your credit applications
If you make too many applications for credit, it can reflect badly on your mortgage application. The lender may think that you’re not creditworthy or that your finances are in a poor state and so, question your ability to make mortgage repayments.
- Review your credit history and score
Before starting your mortgage application, check your borrowing history using a credit reference agency. This allows you to see any inaccuracies in advance, so that mortgage lenders receive correct information on your ability to repay.
Also, check your credit score. If it’s low, see if there are any credit habits that you can improve on by following the below tips. Scoring bands can vary among different credit reference agencies.
- Calculate your debt-to-income ratio
This is the proportion of borrowing you have in relation to your money coming in. Mortgage lenders typically prefer a lower ratio, because it means you’re more likely to be able to afford your monthly mortgage repayments.
- Avoid any unnecessary borrowing
You can reduce your debt-to-income ratio by avoiding borrowing too much. Try not to take out new credit in the six months before applying for a mortgage as it could increase your debt-to-income ratio.
- But keep active credit accounts open
These show to lenders that you’re someone who’s able to consistently make repayments over a period of time. You may want to close inactive accounts as they show lenders that you have access to too much credit that you don’t need.
- Pay your bills on time
It’s always important to pay any bills on time, as any missed or late payments will be recorded on your credit history. So any recent mishaps would be visible to your prospective mortgage lender. This could make them doubt whether you’re able to repay a mortgage on time, or at all.
- Know your joint applicants’ credit profile
Mortgage lenders assess the creditworthiness of all of those named on the application. So, if you’re making a joint application, ask the other person to check their credit history and score in order. You can pass these tips onto them to help them too.
What are mortgage fees?
When applying for a mortgage you will have to factor in the following fees:
- Arrangement fees – These typically range between £100 to £1,500. Arrangement fees cover the time your lender spends setting up your mortgage and handling your application.
- Valuation fees – Valuation fees vary depending on the price of your property.
What does APR mean for a mortgage?
Annual percentage rate (APR) refers to your full borrowing costs for a year. This includes your annual interest rates as well as standard fees payable for the mortgage, such as mortgage broker fees and any other fees you paid to get the mortgage.
Important legal information
Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2065. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.
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