Embarking on the journey of homeownership can be exciting and fulfilling, but it’s not without its complexities. Applying for a mortgage may seem daunting and stressful or may leave you confused by all the steps and unfamiliar jargon.
The good news is that once you understand the basics, the mortgage application process becomes more manageable and approachable.
In this blog post, we demystify and simplify the mortgage application journey by breaking it down into four easy-to-follow steps.
Equipped with this wealth of useful information, achieving your goal of owning a home can become an attainable reality.
When venturing into the realm of mortgages, it’s important to know that lenders will scrutinise every aspect of your financial profile, leaving no stone unturned as they evaluate your finances as part of your application.
To avoid any potential disappointment, it’s crucial to ensure that your financial affairs are in good order before taking the plunge and applying for a mortgage.
Being proactive and demonstrating a robust financial profile will enhance your credibility and pave the way for a smoother and more successful application process.
Here’s a few things you can do to help you get your finances in order:
Check your credit rating:
To check your credit rating, use the three primary UK credit agencies:
When checking your credit score, should you spot any errors within file, act as soon as possible by reaching out to the respective agency for corrections. It’s important to rectify any errors before initiating the mortgage application process.
Keep in mind that if you have any past credit mishaps, their impact on your credit score may persist for a while. Regrettably, patience may be necessary in such instances as you await the gradual resolution of these issues.
Build your deposit:
The size of your savings can significantly impact your borrowing and the range of favourable deals available to you.
As a general guideline, aim to save at least 10% of the property’s total value that you intend to purchase. For example, if your eyes are set on houses valued at £250,000, strive to save a minimum of £25,000.
While it’s standard to target a 10% deposit, in certain scenarios, mortgages may be attainable for those with a 5% deposit.
Contacting a mortgage brokerage will help you assess the viability of a mortgage with a lower deposit. Our advisors can offer you a comprehensive understanding of your financial options.
Streamline your financial profile:
Lenders often conduct thorough affordability assessments to predict your ability to meet repayments in the event of interest rate fluctuations.
Before submitting your formal mortgage application, it’s best to first streamline your income, expenditures and existing debts.
Improve your financial profile by cancelling unnecessary subscriptions and ensuring all payments are up to date before initiating the application process.
You should also prioritise paying off any unsecured loans at the earliest opportunity because it will improve your financial credibility.
Keep in mind that carrying debt may raise concerns during lender assessments, making it advisable to address and resolve outstanding debts before applying for a mortgage.
Demonstrating reliability is crucial when seeking approval from lenders – and consistency is the linchpin in achieving this assurance.
Having a minimum of six months of continuous employment before applying for a mortgage is advisable. This validates the likelihood of a consistent income in the immediate future, instilling confidence in your ability to meet your repayment obligations.
Equally important is registering on the electoral roll at your current address. Being on the electoral roll is pivotal for lenders to verify your identity. Failing to do so may lead to identity verification issues, potentially resulting in credit application rejection due to fraud concerns.
Do your calculations:
Use free online mortgage calculators to estimate your potential borrowing amount and associated costs.
During this process, also consider any additional expenses, including legal fees, survey fees, potential stamp duty, moving costs and any other applicable mortgage-related fees.
By incorporating these considerations into your costs, you’ll gain a more comprehensive understanding of the overall financial implications involved in your mortgage journey.
Once you’ve estimated your rough preliminary budget, the next step is to determine whether you prefer conducting independent market research to secure a deal or seeking assistance from a reputable mortgage brokerage, such as Your Mortgage People.
Our CeMap-qualified mortgage advisors are here to support you at every stage of your application. Using their expertise, they can assist you in identifying the types of rates you are likely eligible for, safeguarding you from common pitfalls and aiding in the preparation of all necessary documents and paperwork required by both lenders and legal teams in advance.
Don’t just take our word for it though. Take a moment to visit our Trustpilot and Google Review pages, where you can see how we’ve consistently delighted individuals like you with our services.
Whether you choose to go it alone or opt for the support of a reliable broker, it’s important to have the following documents prepared before engaging with a mortgage advisor or lender:
- Passport or full UK driving license
- Bank statements – 3-6 months’ worth (In certain situations, lenders may not accept printed bank statements, so be ready to allocate time for obtaining certified copies)
- P60 from employer
- 3-6 months’ worth of payslips
- Evidence of deposit
- Other financial details such as proof of benefits or child maintenance
If you’re self-employed, you’ll also need to provide:
- 2–3-year accounts from an accountant
- Tax form SA302
- Other evidence of your income
With the information supplied above, our team will be able to assist you in obtaining an Agreement in Principle (AIP), also known as a Decision in Principle or Approval in Principle.
While an AIP doesn’t guarantee an offer, it serves as a robust indicator of the potential deal a lender might extend to you. Consider it a crucial milestone in your mortgage application journey.
An AIP will:
- Illustrate the realistic borrowing potential available to you
- Demonstrate your commitment to house hunting, signalling seriousness to estate agents (Occasionally, a property viewing may be denied without an AIP by an agent)
- Enhance your appeal to sellers by proving your financial affairs are in order, verified through a soft credit check conducted by the lender
An AIP will typically last between 3-6 months but can be renewed if you haven’t found the ideal property within that timeframe.
We recommend securing an AIP before embarking on the critical next step in the mortgage application process— finding your ideal home.
Before you start looking for the ideal home, consider crafting a comprehensive list outlining your personalised property requirements. This can include:
- Your preferences regarding property age (new or older)
- The desired number of bedrooms
- Need for off-street parking
- Proximity to a workplace — whether within walking or driving distance
- Preference for a residence in a reputable school catchment area
- Requirement for an enclosed garden, ideal for children or family pets
Detailing information about your ideal property criteria will significantly improve the search process when you embark on finding the perfect place.
If you’re uncertain about the specifics of your ideal home, consider touring some properties initially and creating your list as you go. This hands-on approach allows you to form your preferences, identify must-haves and distinguish between essential features and those you can be flexible about.
If you’re relocating to an unfamiliar area, you can improve your knowledge about the locality by enquiring with a local estate agent. Their insights can guide you on preferred neighbourhoods – and they may even be able to recommend specific streets that align with your preferences.
When you’ve found a property you love, the next step involves submitting your offer through the estate agent. Should the seller express interest, negotiations on the price can commence.
After acceptance of your offer, you can proceed to the final step — initiating the full mortgage application process.
Now comes the moment to submit your official application and when you do, a multitude of processes will be set into motion.
In the subsequent section, we provide a general overview of each step involved, but we strongly advise reaching out to us before proceeding.
As a comprehensive market brokerage, we excel in securing the best deals and adeptly managing the intricate lender and legal facets of your application.
Here’s a breakdown of what unfolds when you formally submit your application:
Once your application is received, the lender’s underwriters thoroughly examine all the submitted documents. This includes a comprehensive assessment of your financial situation, credit history, employment details and the property’s valuation.
Lenders conduct a credit check to evaluate your creditworthiness. A positive credit history strengthens your application, while issues may lead to additional scrutiny or, in some cases, rejection.
A professional valuator assesses the property’s value to ensure it aligns with the loan amount requested. This step is crucial for the lender to mitigate risks.
Offer of loan terms:
If your application is successful, the lender provides an offer detailing the terms of the loan, including the interest rate, repayment terms and any associated fees.
Legal professionals handle the conveyancing process. They ensure the legal transfer of the property and investigate any legal issues that might affect the purchase.
Survey and inspection:
A surveyor may conduct a more detailed survey of the property to identify any structural issues or concerns. This step is crucial for both you and the lender to ensure the property is in good condition.
Once all the checks and assessments are complete, the lender issues the final mortgage approval. This signifies that all conditions have been met and the loan is ready for disbursement.
Exchange of contracts:
After receiving the mortgage offer and ensuring all legal aspects are satisfactory, you and the seller exchange contracts. This is a legally binding agreement and you typically pay a deposit at this stage.
On the agreed-upon completion date, the remaining balance is transferred to the seller, and legal ownership of the property is transferred to you. The keys are handed over and you officially become the homeowner. Congratulations!
Following completion, you start making repayments based on the agreed-upon terms outlined in your mortgage agreement.
Throughout this process, communication with your mortgage advisor, solicitor and estate agent is crucial to address any issues that may arise and ensure a smooth transition from application to homeownership.
Beginning the exciting journey of homeownership can be deeply fulfilling, yet it comes with its share of complexities.
Our team of highly qualified and expert mortgage brokers is dedicated to providing a seamless service, ensuring that what should be a thrilling experience doesn’t unexpectedly transform into a stressful one.
Give us a call on 01489 346624 to begin the journey of home ownership, today.