When it comes to embarking on the journey of buying your first home, the excitement is palpable. Dreaming about the décor, the neighbourhood, and the memories you’ll create is truly invigorating. But with this comes the often daunting world of mortgage applications. A vital yet frequently overlooked aspect is understanding how your affordability impacts your mortgage application. Let’s delve into this with a real-life story that perfectly encapsulates the trials and triumphs of this process.
A Tale of Trials and Triumphs
Our client, a diligent professional, had been meticulously saving up for their dream home. With a steady job, they also had the added advantage of earning through overtime and annual bonuses. Naturally, like most of us would, they turned to online calculators to estimate how much they could borrow. Including their overtime and bonuses, the figures were promising. The dream was within reach!
Or so it seemed.
The Unexpected Hurdle
Upon receiving their agreement in principle and bubbling with enthusiasm, they approached a lender for their mortgage. They were in for a surprise. The lender wasn’t ready to consider their bonus and overtime as a regular part of their salary. Why? Because from the lender’s perspective, such additional income isn’t always consistent and therefore could present a risk.
Our client was crestfallen. The figures they’d calculated were off. The dream home they had in mind seemed a little farther away.
Not All Lenders Are the Same
This is where a guiding hand came in. Their situation isn’t unique. Many first-time buyers sometimes face challenges they hadn’t anticipated with affordability being a common one. And the world of lenders is vast and varied. Not all lenders view income sources the same way.
While some may be conservative in their approach, viewing overtime and bonuses as ‘irregular’ income, others are more accommodating. They understand that many professionals today have diverse income streams that can be just as reliable as a fixed salary.
After a comprehensive market search, assessing the policies and terms of various lenders, a lender was found that recognised our clients full earning potential, including their bonuses and overtime.
This story is both a cautionary tale and an inspirational one for first-time homebuyers. Here’s what we can take away from it:
- Diverse Income Streams: In today’s gig economy, many of us have diverse income streams – from freelancing, bonuses, overtime to other side hustles. Recognise and document every stream. They all contribute to your purchasing power.
- Online Calculators – A Starting Point, Not an End: Online mortgage calculators are tools that give a ballpark figure for affordability. They don’t account for individual lender policies or market dynamics. Use them as a starting point, but always consult a professional for a detailed assessment.
- The Importance of Persistence: Mortgage applications can be daunting. A decline can be disheartening. But remember, it’s not the end. Different lenders have varied criteria. If one door closes, several others might be waiting to open. The key is to persist, research, and seek guidance.
- Seek Expertise: Navigating the mortgage world can be challenging. Seeking advice from mortgage brokers or financial advisers can save time, effort, and potentially money. They can present options you might not have considered and find lenders best suited for your unique circumstances.
The journey of purchasing your first home is filled with highs and lows. But understanding the nuances of your affordability and how it impacts your mortgage application can make a significant difference. With research, persistence, and the right guidance, the dream home you’ve always wanted is well within reach.
Remember, every challenge presents an opportunity. In the realm of mortgages, it’s all about finding the right fit.
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