Top Tips When Preparing To Take Out A Mortgage

Taking your first steps on the property ladder is something that needs a bit of planning these days. For starters, you need to have enough savings for the deposit - 15 per cent of the property's value is the bare minimum in today's market. This can be a significant amount of money and, when you do the maths, would mean you need at least £35,000 to be considered by a lender based on the average UK house price of £228,095.

Then you have the challenge of the subsequent monthly repayments on the mortgage that you would need to make. Although you may have the savings to hand, if you're lucky, do you have the income necessary to meet this monthly expenditure while retaining a good quality of life, paying the bills and indulging yourself in the odd luxury?

Lenders are also becoming more stringent on their lending criteria for mortgages. Now, there is an extensive array of documents needed to support your application, not to mention your credit rating. There are services you can turn to, such as mortgage brokers, who will offer personalised advice on the best loan to fit your circumstances, while also giving you the best chance of success in this challenging environment.

Here is a list of the information you will need to prove you would be a responsible debtor:

• Several forms of identification, such as a passport or driver's licence.
• Evidence that proves you are receiving a regular salary from an employer. This could include correspondence from your boss which explains the role that you have in the company. Although policies can vary from creditor to creditor, your past three pay slips are usually more than enough to satisfy mortgage lenders.
• Should you be lucky enough to have money wired into your account every month from a family member, or another property that is providing you with rental income, you should record this in your application. It can be very beneficial to your prospects of being accepted.
• Are you self employed? If so, the ride you experience could be a little more turbulent. A lender will be looking to be reassured that your business is commercially viable with consistently good profit. The last thing they want is to grant a loan to someone who won't have a job nine months down the line, and the unpredictable nature of entrepreneurialism makes sole proprietors and even some directors a risk. You should have been completing self assessments which show your profits for the past two years, and these need to be filed along with any request for a mortgage.
• A thorough list of any other valuables that you might have, such as cars, vans, other houses or even boats. If you default on any of the payments you make on your home, resulting in your property being repossessed, then this could constitute sufficient collateral for the bank.

Next, you need to be aware of the process of being approved for a mortgage. At first, it is common for a lender to offer you a conditional approval, and this will state that your request for a mortgage will be accepted if you meet the criterion outlined. To ensure your secured loan is for the right amount of money, it's essential that the property you are interested in is valued appropriately.

Once this due diligence phase has passed, you will receive all of the paperwork that corresponds to your loan from the mortgage provider. Required are the mortgage documents and the letter of offer, and you should have all of this documentation explained to you in detail. Not understanding what these forms are for, or any inaccurate information about the homeowner within these files, can have serious repercussions down the line should anything go wrong.

So, now you know that you need to take out a mortgage, how can you secure an exceptional account with generous savings rates? Here is some advice:

• Choose a financial institution that will protect the assets within your account to the tune of £85,000. This means that should the unexpected happen, you will be left with the assurance of knowing that any monies lost due to circumstances beyond your control will be recovered.
• Get a fixed rate ISA, one of the best ISAs for guaranteeing that any interest you accrue on £5,340 of cash in the 2011-12 financial year is considerable. This can help you to achieve your goal of saving for the deposit quicker, allowing you to grab that dream house while it remains on the market.
• Keep an eye on savings interest rates. If you believe that the variable on a savings account is stopping your money from reaching its potential, use a price comparison website in order to find a brand-new bank account. The introductory offers could add precious digits to your savings.
• Try your best to save more than the minimum deposit required. Overpayments on your monthly repayments can be frowned upon by your lender, so now is your opportunity to break the back of your mortgage and get a lower interest rate as a result. One idea could be to budget your income and siphon a set amount of your earnings away into your savings at the end of every month – good practice for when you actually begin to pay for your mortgage.

By being prepared, you will have less chance of your mortgage application being declined - an event that can hurt your credit score and damage your prospects of acceptance by rival lenders.