As part of an affordability check, your income will be taken into consideration. A loan-to-income ratio tells you how much you're borrowing relative to your annual income. If you're planning to buy a house with someone else, you may have two incomes to take into consideration. You may also have bonus or overtime payments you can use as part of your income, depending on what the lender accepts. All the income you declare will need to be evidenced through payslips and statements.
Working out the level of mortgage you can afford is important at this stage as it helps give you an idea of the type of property you might consider.
Money Saving Expert has a simple calculator tool Link opens in a new window which allows you to enter your annual income (and any bonuses or overtime payments) to get an estimate of the range of borrowing you might be offered.
If you're self-employed, remember to consider the new rules put in by lenders following the Mortgage Market Review. In order to secure a mortgage you'll have to work out a figure for your income, so a lender can assess how much you could borrow. There may also be different rules depending on whether you're self-employed, in partnership or a director of a limited company. Find out more about being self-employed and applying for a mortgage.
As you search for a mortgage you'll come across the term ‘loan-to-value' or LTV. This refers to the amount you're looking to borrow as a percentage of the value of the property, so it's essentially determined by the deposit amount you're able to put down.
Here's an example:
Your property is valued at £100,000. You have a deposit of £20,000 and need to borrow £80,000 (80% of the property value), so your loan-to-value is 80%.
If you can increase your deposit you'll lower your LTV. And the lower your LTV, the better the mortgage rate you're likely to get, with a lower monthly repayment.