Applying For A Mortgage

Applying for a mortgage doesn't need to be daunting, in this guide I'll take you through the process, explain the key stages and how to understand your options.

You should enjoy finding your dream home, is a happy and exciting time this can be hard to remember when you're trying to save for deposit and keeping up with monthly mortgage payments, but don't worry it's not so overwhelming when you know what to expect towards each step of the process, what you can afford, and how long it'll take.

• What’s the mortgage process?

Taking out a mortgage can be time-consuming depending on your circumstances. If you're unlucky, by the time you're ready to purchase your perfect property another buyer has beaten you to it, purely because they're better prepared. Now, learning about the process can make it easier to start it sooner meaning you know what the next few months hold, and you can start planning for your future, so let's dive into the six simple steps for successful mortgage application.

Stage 1: Pre-application

Before applying for a mortgage, you need to make sure you are in a good financial position, gather the credit reports from free external bodies to make sure there's nothing on the reports that could put off a potential lender. If you do find anything on the reports that is an error, then contact the credit agencies as soon as possible to get these removed.

• Why will lenders have issues?

Lenders may have issues if you're not on the electoral roll have defaults missed payments or County Court judgments registered against you.

• What may have an impact on my application?

You also need to assess your financial situation, how is your credit score, and is it the right time to apply for a mortgage. A bad credit score can severely impact the deals that are be available to you, so you need to know whether it's worth improving your credit score before starting a mortgage application.

• Jargon to be aware of

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 to look out for include the mortgage type, for example if it's fixed variable or tracker mortgage. This affects the interest rate on your mortgage, so 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 that are usually directly linked to the Bank of England base rate so you can go up and down as well.

The initial rate, this is the rate of interest you'll pay at the start of your mortgage before any introductory rate ends.

Monthly repayments, this is the amount you must pay each month towards your mortgage once your contract starts. Your monthly repayments are based on the product interest rate, the method of repayment and the overall mortgage term. The mortgage duration this is the length of time that the introductory rate is valid, you may have chosen a mortgage rate that's fixed for an initial period.

And finally scheme fees these are fees you're paid to arrange your mortgage scheme fees cover costs such as arrangement valuation and property surveyor. Mortgage fees are typically cost you anywhere up to 2 thousand pound depending on the product you choose. You will also have to pay stamp duty on anything above 125 thousand pound or over 300 thousand pounds for first-time buyers.

Stage 2: Application

Once we found the ideal mortgage for you and you're happy to proceed we'll look to obtain a decision in principle or agreement in principle, this is where we contact the lender with all your relevant information, and we get some feedback from them. Once we get the feedback that is the agreement in principle a decision in principle, this is where the lender has provisionally accepted your application subjects all the information being validated and correct.

• What happens after securing the decision in principle?

Once we've secured your decision in principle, we'll start compiling your official mortgage application, what we'll send you is an introduction pack a key acts illustration and a list of all the documents that we need to supply to lender. You will need to send these back to us, so that we can check through the documents whilst we process it before we submit it to the lender on your behalf.

Stage 3: Assessment and affordability checks

After we've submitted your mortgage application, the lender will underwrite the application further, you will need lots of documents to help support this such as payslips, bank statements accounts, etc.

• So what documents do I need?

Your lender needs certain documents to be able to assess your application, they'll need to confirm who you are and whether you can afford your monthly mortgage payments based on your income and financial commitments. Therefore, you'll need to provide evidence of your identity, your income, and your finances.

• Documents you may need to provide to support your mortgage application are:

Proof of ID, for example passport or birth certificate.

Proof of address from things like utility bills.

Proof of earnings from pay slips.

And proof of income and outgoings from bank statements.

The lender will need to make sure you can maintain your monthly payment, so we'll run through some financial checks. They can review the following areas: employment, salary and other income expenses, outstandings, credit commitments loans, and direct debits, any debts or defaults, any other financial commitments such as childcare costs or school fees.

• Will the lender need additional documents?

The lender may also require additional documents throughout the process that can be a little backup for this stage, which is why we liaised with the lender for you, we do keep it up to date throughout the progress of your application so that you always know what's going on.

• What is a stress test?

Lenders usually perform stress testing when they look at the affordability assessment for you, this is where they look at your net monthly income and your outgoings and see what your net disposable income is. They use this to make sure you can afford your mortgage if interest rates rise.

Stage 4: Valuation

The lender would arrange for a surveyor to go around and complete evaluation on the property that you're looking to buy, this will be where they go around and check the value and check the suitability of the property for mortgage purposes. The valuation is purely for the benefit of the lender and not the buyer.

• Is it possible to renegotiate with the lender?

Every now and then a property requires repairs, or the price agreed is too high, sometimes in these circumstances you can renegotiate with the vendor lenders look at the size and state of the property in comparison to ones that have recently been sold in the area to determine their valuation, but every lender valuation process does defer.

• When is payment expected for the valuation?

You pay for the valuation at the point of full application not when you're secure in a decision in principle.

Stage 5: Offer

Once you've passed the initial affordability checks and the valuation has been carried out successfully, you'll receive your legally binding mortgage offer. If you have an arrangement fee on your mortgage and you haven't already paid it or did it to the loan you may need to pay this now. Some lenders do just deduct this from the advance when they provide the money to your solicitor.

• Can I cancel?

You can cancel your mortgage application at any point throughout the process up to exchange your contracts, once you have exchange contracts, you're then legally binding following through to completion, bear in mind you may lose some money if you do cancel your application, this is because some work may have already been carried out for the mortgage applications such as your valuation, arrangement fees, and also some legal work may have also been carried out already for you.

Stage 6: Completion

Once you've accepted your mortgage offer there are only two steps arranging, signing the contract and transferring your deposit money, your solicitor will contact you to decide a time to come in and sign the contract and also the confirmation of the deposit money.

• Your deposit

As mortgages tend not to cover a 100% of the purchase price you will need to put a deposit down, this is to cover the difference between the mortgage amount and the purchase price, a lender will want no more than 5% as a deposit, but they tend to have 10% or more.

• How long does a mortgage application take?

The timeframe for a mortgage application varies from person to person, it really depends on your situation also the speed of a lender. You could potentially have a mortgage already to go within two weeks or it could have a more complex situation where it could take longer because there's a lot of back-and-forth with a lender, a good reference point is four weeks, however your advisor would be able to give you more accurate timeframe once they've spoken to you.

• Want to hear more?

So that was our guide on applying for a mortgage, thank you so much for watching.

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