Looking for a mortgage can be a stressful business. Often, people are so worried about not being accepted that they end up agreeing to the first offer that comes along, which may not be the best. As in other areas of life, if you’re in tight financial straits, then you’re more likely to end up paying over the odds for services that wealthy people can access more cheaply. This doesn’t mean, however, that you should give up. If you’re patient and diligent and you approach lenders in the right way, then there’s no reason why you shouldn’t be able to get a mortgage that suits your circumstances very well.
Stepping back to get a different perspective on the mortgage market helps with identifying options that you might not have noticed before.
If your earnings are low, then it doesn’t mean that you’ll automatically be ineligible for a mortgage. While some lenders operate with minimum income thresholds, others specialize in helping those on low incomes, and they may even be able to tailor-make a deal for you. Smaller companies are often better at this because they’re more likely to deal with their clients individually instead of running everything through an inflexible computer system. Two things can weigh in your favor in this situation: having good credit (which reassures the lender that you’re reliable) and having a large deposit (which makes it easier for the lender to avoid losses if you default). If you are long-term sick or disabled, then any payments that you receive because of this can be counted as part of your income.
If your earnings are fairly good but vary from month to month, then you will again need to look around for the right mortgage provider. Some charge premium rates because they consider customers like this high risk, but there are better deals out there. If you can prove your earnings for the past three to five years and you have good credit, then you should be able to find a lender who will offer a mortgage rate based on your average income across that time. If possible, choose a provider that provides the option of payment holidays (usually one or two months a year when you can defer payments) so that you can avoid getting in trouble if you have a dry spell.
If you don’t have much money to put into a deposit, then you are likely to be quite limited in the value of the property that you are able to buy. FHA loans, backed by the Federal Housing Association, start from deposits of just 3.5% for borrowers with good credit – the catch is that the lower your deposit, the higher the interest rate you’ll have to pay. The VA, meanwhile, doesn’t always require a deposit and can be more flexible about credit.
Because credit is such an important factor in the deals you’re offered, it’s worth taking a few months to work on improving your rating before you start looking for a mortgage. Never be tempted to exaggerate how well you’re doing – instead, work with prospective lenders to try to find a mortgage that you can comfortably pay.