When you apply for a mortgage the most significant consideration for your lender will be the size of your income. Generally, the more money you earn each month, the more confident the lender will be. He can grant your application thinking that you can afford to repay the loan.
However, it doesn’t always mean that if you have a low income then you can’t get a mortgage. So, if you are looking for getting a mortgage on a low budget in the UK then this article is for you.
Here, in this article, we are going to provide the right information and details that you may find there is a possibility for you. Read this article to find out various parameters of low-income mortgage borrowing.
Is it possible to get a mortgage with a low income?
It is possible to get qualified a mortgage with a low income. The term low can be variable in certain cases but it refers to the amount below the national average.
Various factors need to be considered while opting for a mortgage such as the value of the property you are buying, if there is anyone else who will be named with you in the name of the mortgage, and how much you are going to deposit.
Lenders will evaluate the affordability of the borrowers as a whole first and foremost instead of the exact amount of their pay slips.
So, some other factors that the lenders will take into consideration are-
- Deposit size
- Extra source of income
- Credit history
- Living costs
- Type of home that you want to purchase
So, if all these factors seem to be satisfying to the lender then they can realize that you can afford the repayments of the loan. Thus, your income will not be a barrier to getting a mortgage.
What is the minimum income required for getting qualified for a mortgage?
The majority of lenders have not yet set a minimum benchmark for minimum income rather they evaluate all the applications based on affordability and an individual basis.
However, certain lenders have certain stipulations rather than this open policy. Banks and building societies will generally lend a maximum of 4.5 times your annual income, or your joint income if you are purchasing the home jointly with someone else.
Suppose, if your total income is £25,000 then you will be able to borrow the amount is £112,500. Some people can be able to borrow more than 5.5 times their earnings. But only these deals are open for certain professionals such as lawyers, dentists, and doctors.
Higher earners also will be able to achieve higher amounts of mortgage for purchasing a home. Also, you must keep in mind that income doesn’t mean your salary or earnings. Lenders also check if you have some other sources of earnings.
Your income is not the only factor lenders will take into consideration rather they will check for your affordability. So, they can ask you about your monthly outgoings such as food, regular bills, travel, subscription, rent, socializing, and so on.
To evaluate if you are eligible for the mortgage or not the lenders will conduct a stress test so that they can realize if the interest rates rise even then you can cope with the situation or not. Also, they will evaluate if circumstances change and you lose your job then also whether you can continue the loan repayment.
How to get qualified for a mortgage on a low income?
To get a mortgage on a low income, you need to prove to the lenders that you can afford the repayments of the loan. There are some simple ways that you should follow are-
Step 1: Raising your credit score:
Your credit score is a parameter of how trustworthy you are as a borrower. The higher your credit score is, the lenders will more likely to accept your mortgage application.
Step 2: Reducing your debts:
It will be good if you can repay any debts or loans before proceeding to apply for a mortgage. The lower your monthly outgoings will be, the quicker your application will be approved for a loan.
Step 3: saving up for a larger deposit:
If you can deposit a higher amount then you will require to borrow less money. This means the monthly repayments will be lower than you can easily afford.
Step 4: lowering your costs:
Lenders will ask you about your monthly outgoings, so reducing the monthly subscription charges or even quitting smoking can help you.
What other option is available if I have a low income?
If you are purchasing a home jointly with a partner, a joint mortgage can be another option to get a mortgage on a low income. If you apply jointly, then the lender will evaluate your combined income. This means that you can be able to borrow more.
In this case, both parties will be responsible for paying off the loan. Before proceeding ahead, you must check whether the other person is in the right position or not.
Right, to buy:
This scheme enables tenants of council properties to buy their homes at a discount.
What is the minimum salary to get a mortgage in the UK?
Ans: fortunately, most of the lenders have not yet set a benchmark on the minimum salary. Most lenders evaluate how much they will lend you depending on multiples of your salary. Most of them offer you five times your salary. Some may offer four times, while some of them can stretch it up to six times under the right circumstances.
How can I get a mortgage with no income in the UK?
Ans: Lenders will accept the mortgage application from the unemployed only if they can be sure that you can afford the loan repayments. They will evaluate whether you can afford the monthly repayments on time and can responsibly handle debt. These factors help you to qualify for a mortgage.
Workers with low earnings or low income are not excluded from homeownership in the UK. Whether you are on a trainee’s salary, or working part-time; there are still can be some available options for you to get qualified for a mortgage.
Here, we have discussed several factors that you can consider for getting a mortgage on a low income. Hope, this guide will be helpful for you to purchase your dream house by qualifying for mortgage approval on a low income.