Understanding Your Personal Finances Before Applying for a Mortgage

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A property is the largest investment and purchase that most of us will make during our lifetimes. It makes sense. This is the space where you will spend most of your time and hopefully retire in. If you have children, you will see them grow and thrive in this space. It will be home to your pets, a place for entertaining guests and your nest to hibernate in during the winter months. So you want the best that you can possibly get. Before scouring the property market and applying for a mortgage, however, it’s absolutely essential that you understand your personal financial situation. This will prevent you being denied loans (which will negatively affect your overall credit score) or investing in a property that you will eventually have to forgo, as you are unable to keep up with payments. Here are a few things to contemplate before setting your heart on any property.

Know Your Credit Score

A mortgage is essentially a huge loan that you can use to purchase a property. In a way, you are lending the money, paying it to the property’s owner, then slowly paying back your mortgage provider in smaller installments over time. As with any other form of a loan, your mortgage provider is going to base their decision on whether to hand you the cash by evaluating your previous spending and lending habits. If you have a bad record, they are unlikely to approve you. If you have a good score, you have a better chance. As you are likely asking for a large sum of money, the lender is going to want to be confident that you will stick to your contract and pay them back. So, check your credit score to ensure that you have a good record!

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Overcoming Bad Credit

If you find that you do have bad credit, don’t worry. A mortgage isn’t necessarily entirely out of your reach. You may think that all hope is lost, but with good financial management, you could overcome your current negative rating and start building towards being able to apply for a mortgage with realistic chances of being accepted. For whatever reasons, you have built up a negative reputation amongst lenders in the past. So you need to regain their trust and prove yourself to be reliable. A good way to do this is to take out bad credit personal loans or credit cards. These will often start out with a low credit limit and will have higher interest rates than standard loans, but they give you the opportunity to put your foot back on the credit ladder and improve your score. Once you’ve been approved, ensure that you pay back the money borrowed on time, sticking to all aspects of your repayment contract. Avoid being late or missing payments. As time goes on, your limit will be increased and other lenders may begin to offer you loans or cards too.

Once you are confident that your personal finances are in good and reputable shape, you can start searching for the perfect property to invest in.