A mortgage, for most of us, is the key to owning our own home. Therefore, it’s a massive step for us to take when we apply for one, especially for the first time. In the build-up to the application process, you must employ budgeting tactics for two significant reasons. Firstly, it’ll let you know if you can afford to take on a mortgage compared with your other outgoings. This is important for the bank to see, too. Secondly, by budgeting well in advance, you have the opportunity to save up more of a deposit for your property. Tips for budgeting include using budgeting apps – YNAB being one – which can help cut down on any unnecessary costs in your life right now. A good rule of thumb, and something that lending agencies use to determine your mortgage approval, is the 28% rule. This fluctuates but dictates that your mortgage should eat up no more than approximately a third of your gross income monthly. 

When you’ve got your finances under control, an intermediary step before actually applying for a mortgage may be to do a few checks on how much you can expect to pay. A mortgage calculator is a handy tool here and will allow you to input several variables, such as income, estimated house value, and the repayment period. Keep in mind your deposit here and how this will affect your loan-to-value ratio with your lender. If you have a 10% deposit, your LTV ratio is 90% - the bigger deposit you have, the lower the LTV and the greater your chances of being approved for a mortgage. You know that you’ve reached the independent adult stage of your life when you’re going through these sums! 

When it comes to the application stage, know that even though you’ve gone to great pains to prepare for this moment, it could still be a while before your mortgage is approved due to the process your lender needs to go through. Something which will differ depending on the lender you apply with is the interest rate. This is also likely to change across the repayment period, but obtaining a lower rate is sometimes possible through a mortgage broker. A broker has exceptional knowledge of the market and works with various lenders to find the best deal for you. They can also negotiate on your behalf. Finally, you’ll need to show your lender proof of homeowner’s insurance before they’ll approve you. This indicates that you’re covered should anything go wrong with the property after your purchase completes. It’s a complex and often arduous process, but applying for a mortgage is always worth it when it’s approved, and you feel the enjoyment of having a home.