As I look out today at the glorious Manchester sunshine (this article isn’t a parody I promise!) yearning for a bigger garden in which to enjoy it’s thrice yearly appearance it makes me reflect on one of the most common questions I’m asked ; “Shadi, how much am I able to borrow?” I will discuss some of the key factors lenders will assess when determining how much you can borrow. There isn’t a one size fits all approach as there are hundreds of lenders with thousands of products, each with their own unique criteria. Hopefully the below will prove informative and a good foundation in helping you through the mortgage process with me at your side.

How much INCOME do I need for a mortgage?

Gone are the days of the generic 25 year mortgage based on 4x your annual income. However how much you earn is still absolutely one of the key drivers in how much you can borrow. Theoretically it determines how much per month you can afford to repay. Lenders will assess various factors in your income such as how much you receive, how your income is comprised (for example is it all basic income, is there overtime/commission, do you receive benefits etc) and the sustainability of your income. Whilst income multiples are still around and involved to an extent it is my job to establish all forms of income streams you may have and what will be allowable to which lenders to fully maximise your borrowing potential.

Will mortgage lenders want to see my EXPENDITURE?

Whilst it’s true lenders generally request and assess bank statements they aren’t completely judgmental! They won’t judge how many times you’ve ordered from Just Eat or other takeaway establishments and the occasional accumulator ruined by United won’t prevent you from obtaining a mortgage. They are concerned with things like general account conduct. This includes how heavily you rely on your overdraft, missed payments or concerning negative patterns or trends. Or if you need to rely on buy now pay later facilities such as Klarna thus regularly increasing your monthly commitments. Mandatory commitments such as student loan repayments, other mortgage repayments, service charge, car finance or other loans or credit cards are taken into consideration and lenders would then like to see a sufficient level of disposable income available thereafter on which to make their affordability assessment. How you then choose to spend your money after affordability has been established is not their concern as a general rule.

Do I need good CREDIT for a mortgage?

Whilst this is not linked to the amount of money you can borrow per se it is certainly fundamental in your ability to obtain a mortgage. This is because lenders assess your credit report as the only tangible method of gauging your reliability in repaying your financial commitments. Repaying your mortgage on time and in full is an extrapolation of how you manage your existing commitments. Whilst you may think what does it matter if you pay a bill a few days late, they’ve got their money anyway this kind of thing can be a major concern for lenders. As a specialist broker with access to a multitude of different lenders who aim to help people with various different ranges of score in their credit profile it is always worth speaking to me as there is a good chance I can assist. Regardless of your situation however your first port of call should always be to obtain a copy of your credit report.

How much DEPOSIT do I need for a mortgage

Whilst there are some specialist schemes such as the Family Springboard that don’t require a deposit, generally a deposit is required when obtaining a mortgage. Your deposit impacts your Loan To Value (LTV) which is essentially the value of your home or the home you wish to purchase (V) against the mortgage you wish to obtain (the loan or L) expressed as a percentage. So for example if you wanted to purchase a property for £200,000 with a £20,000 deposit you would need a 90% LTV mortgage. The deposit and LTV of your mortgage impact how much you can borrow in a few ways. Generally the lower the LTV the higher income multiples lenders are prepared to allow as the lower the LTV the lower the risk represented to lenders in events such as house prices dropping significantly. These multiples can vary from between 4-5.5x your income but is based on numerous different factors and vary from lender to lender but LTV is one such factor. Lenders also tend to tier their rates across various different LTV brackets. These are usually in 5% increments ranging from between 60-95%. This may impact how much you can borrow as if you’re a small amount away from the next LTV bracket it could have an impact on the interest rate you pay across the entirety of your mortgage. This difference in interest rate and as a result monthly repayments could be the difference to you as to whether you feel you can afford your dream home or not. I am happy to deal with any further queries or any more in depth questions you may have and am available for an initial free, no obligation chat. Don’t just stare out of your window pining for your dream home, let me help you turn this dream into a reality!