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Getting a foot on the property ladder seems far-off especially when you are one of those who are not moneyed. A mortgage lender factors into your credit rating, income sources and future ability to pay off the debt into the bargain.

When you are on low wages, it can be hard to pull off a mortgage. However, the good news is that it is not impossible either. How much money you want to borrow is also a prominent factor a lender will take into account to decide whether to sign off on your application.

Affordability opens the door to approval. Lenders do not want to embroil themselves into repossession, so they will not give the nod to your application unless you show affordability.

Tips for buying a home with low income

Here are the strategies you should follow to take out a mortgage with low income:

Check your credit score

A lender will make hard checks to know your past payment behaviour. If you have been applying with a broker, they will make soft checks to introduce you to a compatible lender who will run a hard check to know your commitment towards payments.

Bear in mind your affordability will be called into question if you have a track record of missed payments in the past. The three-digit score that credit reference agencies calculate for you does not blow away lenders at all, as they use their own formula to determine it. They rather lay emphasis on credit information such as:

Defaults
Late payments
How much you owed
The frequency of taking out a new loan

Your credit report will raise doubts due to any of the aforementioned factors, even if your credit score shows you an advantage. It means you cannot just stay limited to what the three-digit score says.

Keep your debt-to-income ratio low

How much debt you owe against your income can make it or break it. You might have been paying off your debt on time, but in spite of that, your lender can be suspicious of your repaying capacity.

A mortgage is a long-term debt. You will be tied to a payment term for as many as 20 years or more. A high debt-to-income ratio insinuates that you may struggle to make payments on time. It will put your house on the line. You should try to keep it as low as 25%. It will work to your advantage if you do not owe any money at all while taking out a mortgage.

Remember that your credit utilisation ratio will also be factored into, so you cannot afford to have more than 30% of the available balance. You can avoid relying on loans by maintaining an emergency cushion. It will help you tide over during emergencies; however, you can turn to monthly instalment loans with no credit check when you cannot count on your savings in your hour of need. Make sure that you settle your debt before applying for a mortgage to improve your chances of qualifying despite low income.

Choose the favourable time

There is no guarantee that you will get the nod for a mortgage even if all the odds are in your favour. Your lender might be doubtful about your repaying capacity when your wages are low. Not only is the decision made by taking account of your current financial condition but also by calculating your future ability to pay off debts.

It is hard to guarantee that your financial condition will remain stable throughout your life. You may get the push and take a bit longer time to land a new job. A missed payment can result in complications. Although you can request your lender to revise your payment schedule or activate a payment holiday, there is no guarantee that you will get support from them. Therefore, it makes more sense to choose a better time to apply for a mortgage.

It is a good idea to wait until your income improves. You should get a job with higher pay or a side gig. With improved income sources, you can improve your chances of qualifying for affordable interest rates.

Put down a larger deposit

Because you are on low wages, it does not mean that you can escape submitting a larger down payment. A larger deposit will reduce the size of a mortgage, which makes a lender more comfortable. Your lender will possibly sign off on your application without a hitch if they notice the risk is somehow abated.

Arranging a larger down payment with a low income is not a cinch. You will need to make a strategy to have a deposit worth at least 20% of the market value of your house. It will certainly take a long time. You should try to buy a smaller house so you do not have to bend backwards to set aside money to pay upfront. Choose a mediocre location where you can get houses at lower prices.

You will have to do extensive market research. Use the internet to get a line on property details or contact real estate agents to gain insight into the housing market. However, keep in mind you will have to bear extra fees.

Take the help of a mortgage broker

It can be hard to apply to a mortgage lender directly. You might be turned down, and each time, you will lose your credit points. To avoid risking losing your credit points, you should apply for a mortgage with the help of a broker. They will assess your application and choose a lender that matches your requirements. A broker will help improve your chances of being accepted by a lender despite the low income.

Understand the consequences

The mortgage market is complex. Sometimes, you may have to buy a property before the sale of your existing house has been executed. In this scenario, residential bridging loans in the UK can come in handy. These are short-term loans, but the borrowing sum is large. You should be well aware of the advantages and drawbacks so you do not “rue the day”.

The bottom line

It can be slightly complicated to buy a house with a low income, but you can get it through using some strategies. Make sure your credit report is up to snuff and that the debt-to-income ratio is very low. A larger deposit can increase your chances of being accepted. Try to apply for a mortgage with a broker, as they will arrange a lender that matches your financial circumstances. You can quickly get a mortgage.