How much can I borrow?
Before you know how much to buy for, you need to know how much you can borrow
For a full article on this topic head over to Step 1 - The Essential 6-Step Guide to buying your first home
It's all about affordability
Before a lender can give you an indication of how much they are prepared to lend you, they will look at all your income and outgoings, and apply an 'affordability calculation' to determine how much they feel you can comfortably afford each month on your mortgage payments.
More often than not - what you feel you are comfortable paying each month, will not be the same as what the lenders feel is affordable to you. For this reason, you can find you are not able to borrow as much as you had hoped for or you feel you can afford.
A full guide to knowing your figures can be found in Step-1 of The Essential 6-Step Guide to buying your first home.
Here's a few pointers to find out, and maximise, what you are able to borrow:
Complete a 'budget planner'
Let be honest here - filling in a budget planner is boring, and it's 15-30 minutes of your life that you'll never get back, but if your looking to take out a mortgage it's something you need to do right at the start of the home-buying process.
You can find budget planners on-line, or you can use this one:
Use the lenders affordability calculators
Once you have all your figures sorted in the budget planner, you can go on-line and start using the lenders affordability calculators to find out how much you can borrow.
How much credit do you have?
If you have a lot of credit commitments in the background it will affect how much you can borrow. This can be credit card debt, personal loans or car finance. If you are looking to take out a mortgage you should concentrate on reducing your debts and definitely don't take any new ones out.
[TIP] If you have less than 6-months remaining on a loan - you can discount it in many cases.
How much do you earn?
Put simply: the more you earn, the more you can borrow. It makes sense really as all the lenders now use affordability calculations to look at both your income and outgoings to assess how much they will lend you. The amount you will be able to borrow can (and will) vary dramatically from lender-to-lender - so it's always worth shopping about.
[TIP] Pension and student loan payments are likely to reduce the amount you can borrow.
Are you buying on your own, or with a partner?
The banks and building societies see joint applicants as less of a risk than single applicants and will offer you more money as a multiple of your income because of this.
[TIP] If your partner has bad credit, it can effect your ability to get a mortgage with them.
Go Direct or use a mortgage broker