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Qualifying for a mortgage
Qualifying For a Mortgage:
The Four Mortgage Qualifier Factors

Thinking about applying for a mortgage and what's involved in qualifying for a mortgage?  There are four key mortgage qualifier factors that a prospective lender will consider above anything else when deciding whether or not to approve your application. These factors will also help determine the amount you can actually borrow in the mortgage calculator process.

Here we go through each of these mortgage qualifier factors in random order, since different lenders will place different weighting on each factor (although the size of your deposit is often of most interest to a lender) in the mortgage calculator process. This will help you assess where you stand when qualifying for a mortgage.

Qualifying for a mortgage: how and how much?

Generally speaking, most people will end up qualifying for a mortgage that is equal to about triple their salary for individual applications and two and a half times joint salaries if two people are applying for the loan. In practice, especially in recent years, UK lenders have been lending above these mortgage qualifier levels (even going as high as five times your income) but, given the current credit crunch, higher offers may become few and far between. And, of course, you'll need to be in steady employment, have manageable debts, and a good credit history when qualifying for a mortgage.

Mortgage qualifier factor 1: Your income

Assuming the above ratio, this means that if you and your spouse each earn a £25,000 gross salary each year, you can, on average, expect to end up qualifying for a mortgage of around £125,000.

Keep in mind, though, that lenders are very particular when it comes to defining gross income. If you work lots of overtime or work in a job where commission (or even tips) make up a large proportion of your income then you will need to prove that this portion of your income is sustainable. Being able to demonstrate that you have received a certain amount consistently in commission for the past 2-3 years, for example, will help ensure that this variable income is factored into your mortgage qualifier calculations. But, lenders may only take a percentage into consideration here depending on their internal procedures.

When qualifying for a mortgage, if you are self-employed then many lenders will ask to see specific information that proves your income for a set period. So, for example, they may need to see audited accounts going back for three years. Unfortunately, most self-employed individuals will find that all the work they did to keep their net taxable income low can have a negative impact on their qualifying for a mortgage. Why is this? Simply put, lenders don't like taking risks and they don't like the idea of lending to someone whose future income is uncertain. And, they may well average out your income over the three years which could cut into your borrowing capability when determining mortgage qualifier status.

Your total income is not enough to work out how much of a mortgage you can afford in a mortgage qualifier. You will also need to work out how much you already spend every month in the repayment of existing debts/financial products and in everyday living costs (including bills and general cost of living expenses).  Often it is the money that you have left over when you take this spending off your salary in which lenders are most interested.

Mortgage qualifier factor 2: The deposit

Size really does matter! Generally speaking, bigger is better here. In other words, the more you can give a lender in an upfront payment, the easier it should be in qualifying for a mortgage, since the lender's risk is lower. But what if you don't have a lot of spare cash for a deposit? You still can get a mortgage, but the bottom line is that it might be more difficult to get approval, it might be more expensive, and it may come with more tie-in clauses in your terms and conditions. You can technically even apply for 100% (or higher!) mortgages, although these products are being offered much less frequently nowadays. It's probably better in any case to avoid these kinds of mortgage qualifier deals as they can cost an awful lot more than standard deals with deposits. So, try to scrape together at least 5-10% of the purchase price for your deposit.

Mortgage qualifier factor 3: Marketability

Location, location, location! You may not think that where you buy matters, but it does and it could have an effect on your qualifying for a mortgage, and the figure you are given at the end of the mortgage calculator process. For lenders giving out mortgage approval is all about risk. It's not just the risk that you might default on your payments and they have to repossess your home; it's also about what they can do with the property if that happens. So, if you buy a property in a run-down area where houses do not sell and are often abandoned, then many lenders might refuse you a mortgage on the basis that the property is not marketable. The physical condition of the property can also play a part here; i.e. many lenders won't give mortgages for ex-council flats in tower blocks as they can be prone to construction deterioration that makes them less marketable. And, check the lease left on the property if it is not freehold.  Many lenders will ask for a certain number of years left on a lease, before they will approve a mortgage for the property.
Ultimately, what this means for you as a customer, qualifying for a mortgage, is that the mortgage approved could be for a lower amount (or turned down completely) if the property is deemed too risky from the lender's mortgage calculator perspective.

Mortgage qualifier factor 4: The impact of your credit history

Your credit history plays a very important role in qualifying for a mortgage. This is because, when considering their mortgage qualifier process, lenders want to make certain as much as possible that you are going to be consistent in repaying the mortgage. If you have had a lot of late payments on credit cards or loans or have got CCJs against your name then you will find it more difficult in qualifying for a mortgage.

Even something seemingly as minor as forgetting to make the minimum payment on a store card can come back to haunt you if you do this regularly. Remember, too, that it's not just what your credit situation is like today that counts; it's what your credit history has been like over the last five or six years. One way you can check on that history and the effect it will have on your qualifying for a mortgage, is by ordering your credit report.
Help! I don't know if I am going to qualify!

As mentioned above, if you have had credit problems from a mortgage qualifier perspective, then a larger deposit may help mitigate this situation with some lenders. Another option is to consider looking at specialist mortgages targeted at people with less than impeccable credit records; here the mortgage calculator may work in your favour more.
If you already know that you will have difficulties in qualifying for a mortgage, consider talking to an experienced mortgage broker. He or she is qualified to deal with a wide array of lenders and will be able to give you an informed opinion up front on whether or not you are likely to qualify. Mortgage brokers can also help you look at alternatives, such as specialist mortgage deals.

In summary, remember that, when qualifying for a mortgage, each lender will weigh up these four mortgage qualifier factors differently and will of course consider the unique situation of each mortgage applicant that comes their way before they come up with a mortgage calculator figure.

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