A mortgage is a big affair that takes several formalities. It includes a huge investment on the side of the lender and a lot of efforts on the part of the applicant. This gives rise to countless questions but none of them can get a sudden answer. After all, it is a big decision for both the lender and the fund seeker. For instance, how much do you need to earn for a particular mortgage amount is a common question. There cannot be a fixed reply to this query. Many other factors are also important to consider, as varied factors are interlinked.
Decision Is On the Discretion of the Lender
Credit score status – Some lenders may prefer to consider only good credit people while some are fine even with the bad credit. As the flexibility of online lending provides funds to even bad credit people, here too some constraints may encounter you. For example, 561-720 (according to Experian) is the bad credit score category. Some lenders may accept the applications of people with 561 credit score. On the other hand, some may have the policy to not to consider the borrowers with credit scores less than 600. Also, from which credit reference agency a lender takes the credit report also matters a lot. These agencies have different criteria to assign credit scores.
Stability of employment – When it is about the huge amount of mortgage, the regularity of income becomes an important aspect. For that, the stability of employment naturally becomes important. You may be earning good currently but last year you were unemployed for 4 months. This may raise a concern for the lender irrespective of the fact that your current salary is too good. Finance companies demand at least 3 years of job stability, some may ask for two or whatever. But, a break in employment period usually obstructs the loan procedures. It makes the finance company give a second thought on the applicant.
Your available deposit – Oh, this component is of great importance. More deposit you have, less you need to borrow and easier is to get the approval. Lenders take it as a positive thing. With a lesser amount in deposit, the need for a loan amount is bigger. In that case, you may or may not qualify for the whole amount required.
Similarly, there can be other things that may differ from lender to lender.
Income Matters Due To Below Reasons
It is very important for loan companies to know your repayment capacity. This is the first and foremost thing to check. In short, the income tells about your affordability of a certain mortgage amount. This affordability is determined through the ‘debt-to-income’ ratio. This is a calculation of income versus outgoing. Lower debt to income ratio means you have more disposable income. Here too lenders have different perspectives. Some lend money up to 40% of income while some go for 50%, or may be 60%. You can see, how things matter in the approval decision.
Finally, How Much You Need To Earn For £200 000?
Variable or floating interest loans: This type of lending is made at a variable interest rate. You can get the cost-benefit or may pay extra according to the current interest rate. Generally, long-term personal loans are disbursed at a floating interest rate. Similarly, the line of credit is also offered at a variable interest rate.
Although, the above reasons play a decisive role in approval decision but still a general idea can be taken. Suppose your income is £35000 annually. In that case, you need to search for a lender that offers mortgage of 60% of your annual income. However, this can also work if other circumstances and decisive components go well.
On the other side of the coin, if you have a deposit of £70,000, then definitely you have a wider choice of lenders. The table below can give a clearer idea of how much you can be eligible for with varied annual income amount.
Every small detail matters in mortgage decision and nothing can be left unnoticed. Consider all the above factors and apply with a calculative mind. One conclusion is obvious, having a good deposit drastically ease the struggle of the journey of the mortgage process.