Guide to Applying for a Mortgage

There are 6 simple steps to a successful mortgage application: pre-application, initial application, assessment and affordability checks, valuation, offer, completion.

¹Pre-Application

Before you apply for a mortgage, you need to make sure you’re in a good financial position. Gather credit reports from 3 external bodies and check that there’s no information which could deter a lender. If any information in your credit report is incorrect, contact the agency so they can amend the error as soon as possible. Lenders may have issues if you’re not on the electoral roll, have previously missed payments on credit commitments or have defaults or county court judgments recorded against you.

You also need to assess your financial situation. How’s your credit score? Is this the right time to apply for a mortgage? A bad credit score can be severely detrimental to the deals available to you, so consider whether you need to improve your rating before starting your mortgage application.

If you’ve never applied for a mortgage before, you can use our online table to compare first-time buyer mortgage rates for an initial idea of the deals available to you.

There’s a lot of jargon to get your head around when you first start your research, especially if you’re a first-time buyer. Some of the terms you want to look out for include:

• Mortgage type, e.g. fixed, variable or tracker

The interest rate on your mortgage. Your interest rate won’t change if it’s a fixed-rate, whereas the interest on a variable rate mortgage may move up and down. Tracker rate mortgages are a type of variable rate and are usually directly linked to the Bank of England base rate; they can go up as well as down. 

• Initial rate

The rate of interest you’ll pay at the start of your mortgage before any introductory rate ends. 

• Monthly repayments

The amount you must pay each month towards your mortgage once your contract starts based on the product interest rate, the method of repayment and the overall mortgage term. 

• Mortgage duration

The duration of your mortgage refers to the length of the time that the introductory rate is valid. It may be that you’ve chosen a mortgage rate that’s fixed for an initial period. 

• Scheme fees 

The money you’ll pay to arrange the mortgage. Scheme fees cover costs such as arrangement, valuation and property surveying. Mortgage fees will typically cost you anywhere from £0 up to £2,000, depending on the chosen product. You’ll also have to pay Stamp Duty on anything above £250,000, or over £425,000 for first-time buyers.

²Initial Application

Once we’ve found the ideal mortgage for your situation and you’re happy to proceed, we’ll contact the chosen lender for a Decision in Principle (DIP). This is not the actual full application but the first part where we tell a lender all about you.  The feedback is called a Decision in Principle or Agreement in Principle and is subject to the full application and underwriting, including a satisfactory valuation. The lender essentially promises that they’ll accept your official mortgage application as long as the information you’ve given them is correct and can be validated. We explain everything you need to know about securing your DIP below.

Once we’ve secured the DIP, we’ll start compiling your official application. We’ll send you an Introduction Pack and a Key Facts Illustration (KFI) which will include a list of the documents we need to send to the lender. Your adviser will go through the Introduction Pack and KFI with you before we send them.  You’ll then send us your documents so we can check them while we process and underwrite your mortgage application inhouse, before submitting it to the lender on your behalf.

³Assessment and Affordability Checks

After we’ve submitted your mortgage application, the lender will underwrite your application further.  You’ll need lots of documents to support your application, like payslips, bank statements, accounts, etc. The lender may also require additional documents throughout the process. There can be a lot of back and forth at this stage, which is why we liaise with the lender on your behalf. We’ll also deliver regular updates on the progress of your application so you’re always aware of how it’s going. 

Lenders usually perform what is known as a "stress test" or affordability assessment.  Essentially, they look at your net disposable income, i.e. your net monthly pay, to see if you could still afford the monthly payments should interest rates rise – even if you’re on a fixed rate.  This is in place to protect both you and the lender, should the Bank of England increase interest rates significantly.

⁴Valuation

The lender will arrange for a surveyor to carry out a valuation of the property you want to buy to assess its value and suitability as security for the mortgage. This valuation is for the benefit of the lender, not the buyer.  

Every now and then a property requires repairs, or the price being asked for is too high. In these circumstances, it’s sometimes possible to renegotiate with the vendor. Generally, lenders look at the size and condition compared to similar properties that were sold recently in the local area, but the valuation process will differ between lenders. 

You pay for the valuation when we submit the full application to the lender – not when securing a DIP. Your mortgage adviser will explain this to you beforehand, so you won’t be shocked by any surprise fees.

⁶Completion

Once you’ve accepted the mortgage offer from your lender, there are only 2 major steps left. Signing contracts and the transference of your deposit money. Your solicitor will contact you to arrange a date to sign contacts and confirm the transference of your deposit.

Also known as a "mortgage in principle" or Agreement in Principle (AIP), the DIP is an agreement from a mortgage lender that they’ll lend you a certain amount of money, on the condition that the information given to them is accurate. We give them information on your address history, your earnings and your credit commitments. This enables them to do a quick credit search and to credit score your potential application. They also have an underwriter vet this initial application. Then they’ll either accept or decline based on your information and their findings. 

The timeframe for a mortgage application varies from person to person. How long it takes to get a mortgage depends on your unique situation as well as the speed of the lender. Your mortgage could easily be ready in 2 weeks, but this isn’t always possible. You may have a complex situation which requires a lot of back and forth with the lender, or there may be issues with your mortgage application, such as those raised on a valuation. A good reference point is about 30 – 60 days from application to closing. Your adviser will give you a more accurate idea of the timeline you’re looking at once they start the process. 

Here’s a general overview of the timeline and factors that can affect the duration of a mortgage application process: 

General Timeline to Get a Mortgage Offer and Close on Property 

1. Pre-approval: this initial step can take a few days to a week. Getting pre-approved involves submitting financial documents and undergoing a credit check. It provides an estimate of how much you can borrow and shows sellers that you are a serious buyer 

2. Finding a property: the length of this phase varies widely among buyers. Once you have an accepted offer, the formal mortgage application begins 

3. Application submission: once you submit your complete mortgage application, initial processing typically takes a few days. The lender will review your documents, verify your financial information, and initiate other steps like the property appraisal 

4. Underwriting: this is the most time-consuming part of the process, often taking 2 - 3 weeks. The underwriter reviews all the data to ensure compliance with lender and regulatory requirements and assesses the risk of lending to you 

5. Property valuation and additional reviews: a surveyor is usually required to confirm the property's value and condition. This part can add a week or more, depending on the availability of appraisers. In some cases, additional reviews like a title search and inspections are necessary 

6. Final approval and closing: once the underwriting and all reviews are complete, the lender will issue a final mortgage offer. Once accepted, the closing date is set, where you'll sign the final documents and take ownership of the property. Closing itself typically takes a few hours but scheduling can add days to weeks depending on all parties' availability 

Factors Affecting Duration of Mortgage Approval Process 

• Lender workload: application processing times can vary with the lender’s current workload. Busy periods can lead to longer processing times 

• Your financial situation: applications involving complex financial situations, such as self-employment or multiple income sources, may require additional scrutiny and time 

• Property issues: problems discovered during the appraisal or inspection, such as necessary repairs or title issues, can cause delays 

• Responsiveness: the speed at which you respond to requests for additional documentation or clarification can significantly affect the timeline 

Tips for Speeding Up the Mortgage Process 

• Be prepared: gather all necessary documentation, such as pay stubs, tax returns, bank statements, and other financial records, before applying 

• Respond quickly: stay on top of any requests from the lender for additional information or documentation 

• Work with experienced professionals: an experienced mortgage broker, real estate agent, and lender can help navigate the process efficiently and anticipate potential delays 

Understanding these factors and preparing accordingly can help streamline your mortgage application process. Contact us on 0330 433 2927 to learn more.