With the cost of renting property spiralling higher all the time, getting onto the property ladder has become more desirable than ever.
If you don't have a lot of money coming into the house it may seem like an impossible task. We take a look at how to apply for a mortgage with a low income and the factors which could improve your chances.
Although it may seem frustrating, lenders are cautious about how much they allow individuals to borrow simply because they don't want to see them getting into debt they can't afford to pay.
Some of the mainstream lenders can be particularly cautious but there are low income mortgage companies who specialise in assessing applications from those with less money.
The good news is that the way mortgages are assessed has changed in recent years. You may have heard in the past lenders referring to multiples of salary; this method is no longer used across the industry. Instead an affordability check will be carried out where a lender assesses how much you can afford to pay.
How to increase your affordability
Obviously when considering low income mortgage options, you may well want to maximise the amount of money you will be able to borrow. Take care when you are considering this; you don't want to end up getting a mortgage with a low income and finding out you can't afford it.
Low income mortgage lenders will look at several things. Although the amount of money you have coming into the household will inevitably play a part, there are several other factors which can impact how much you are ultimately allowed to borrow.
Your credit rating has a bearing on whether you are approved or rejected but it also can determine how much money you are permitted to borrow, a fact not many people are aware of. Those with the best credit score will be allowed to borrow money at the top end of the scale whilst those with more than a few problems on their record will be approved for a much lower amount.
Your outgoings will also determine how much cash you have left spare to pay for a property so taking steps to minimise what you have to pay out can help. Cancelling any credit cards or other lending facilities which you no longer use can also help to bump the figure up as banks get nervous about you having access to more borrowing, even if you don't plan on using it.
The impact these measures take may not be overwhelming but when you are trying to find a mortgage for low income earners, every little step contributes.
It's particularly important to compare low income mortgages as getting the most competitive deal could make a significant difference between how stretched your budget is.
You will probably find that the best deals are on offer to those who have a large deposit and are looking to borrow a lower LTV. If you have savings which could help to bump up the deposit, you could find that the lender is willing to extend a more competitive deal on the rest of the mortgage. A low income mortgage comparison will show the size deposit that each lender wants.
If getting a regular mortgage looks like a mountain you simply can't climb, don't give up all hope of owning your own home. There are other options you could explore such as shared ownership, where you start with a small share and spiral up until you own it outright. There are also government schemes designed to help the first time buyer to get their foot on the first rung.