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Eligibility

Understanding mortgages: Your complete guide to the application process

There is a lot to consider when it comes to applying for a mortgage. Like what types will best suit you, your circumstances and plans, and which you’ll be eligible for. Ultimately, lenders want to know whether you can afford to repay the loan, so they’ll be looking at present and future affordability.

Understanding the mortgage process is important. In this guide, we’ll take you through the process; starting with what types of mortgages are available. While they do come in various forms, there are two primary types:

  • Fixed rate mortgages - providing a steady interest rate for an agreed period, you should know your exact monthly repayments. Unless agreed between you and the lender, once this period is over, the mortgage normally automatically changes to the lender’s standard variable rate (SVR).
  • Variable-rate mortgages - these are based on an interest rate which can fluctuate in line with the lender’s discretion; influenced by the economy, in particular the Bank of England (BoE) base rate.
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Did you know...
 

The net total of mortgage approvals rose to the highest level in two years in August, the Bank of England (BoE) confirms.

Assessing your finances

There is little point in setting your heart on a property you can’t afford so, you should establish your financial situation before looking at properties. Knowing where you stand financially, what monthly payments you can afford, and doing all you can in advance to give yourself the best chance of securing the mortgage you need is prudent. A mortgage calculator is a good place to start. It can give you an idea of what you can afford before seeking professional advice. Be prepared for it to take time to get your finances in order if your current position isn’t strong.

Mortgage affordability

The key factors a lender will be interested in are:

  • Your credit score and history - they will want to know that you’d make a reliable borrower.
  • Your personal income - naturally, this plays an important part in their affordability assessment.
  • Your outgoings - it’s may be unsurprising, but a lender will be keen to establish what financial commitments you have and how much this equates to each month. They’ll take into consideration regular payments towards credit card repayments, car finance obligations etc.

Preparing documentation

Each lender’s mortgage application requirements vary. However, it will help to have some generic documentation at the ready, such as:

  • Bank statements - usually three months’ worth, though sometimes six.
  • Payslips and proof of income - how many will depend on how frequently you’re paid. If you’re self-employed, required documentation will vary based on your circumstances, though generally includes HMRC tax calculations and overviews. A qualified accountant will be able to help.  
  • Evidence of additional income - benefits, pensions and maintenance payments will all count. 
  • ID - you’ll need your current passport or full driving licence photo card and proof of current address.
  • Evidence of deposit - lenders will want to see if it’s from savings or a gift. 
  • Proof of residency and nationality - for those who have moved to the UK from overseas. Typically, a visa or Home Office letter.

Finding the most suitable mortgage

The most suitable mortgage for you will depend on varying factors, including market conditions, economic forecasts and your own financial circumstances. Professional mortgage advice from a qualified broker is invaluable. They are practiced in taking an objective overview of all factors. Whether you are remortgaging, looking for a fixed rate option or something more specific, like a mortgage for a new build property, enhanced cashback, offset and self-build or green mortgages, a good broker can help, regardless of the Loan to Value (LTV) ratio you’re expecting.

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Mortgage in principle process

A mortgage in principle is confirmation from a lender that they would lend you a specific sum ‘in principle’. It is not a mortgage offer. Whilst not essential, it may help with house-hunting as it indicates to sellers that you’re in a position to buy. A lender or broker will help with the process, which is not as lengthy as a mortgage application. It involves a credit check and the submission of basic personal information. They are generally valid for between 30 and 90 days.

Making an application

You’ll need to make your application for your mortgage when your offer on a property has been accepted. The lender then instructs a surveyor to carry out a property valuation. They also check the documentation you’ve submitted and your credit history – which will show on your credit file. If your application isn’t approved, it’s worth finding out the reasons why. Avoid rushing into mortgage applications too closely together as it could affect your credit score. A mortgage broker can help you manage the process.

Understanding mortgage offer and terms

If the application has been successful, the lender will provide you with a formal mortgage offer. As a guideline, this should take around four weeks though may take longer. They are normally valid for six months. Remortgage offers are usually only valid for three months.

Valuation and survey

Both the valuation and survey are crucial to the mortgage process. The valuation is carried out so the lender knows the property is worth the selling price. You will also need to arrange a separate survey and need to choose which type is most suitable for you and the property you’re buying. Most buyers opt for a mid-level survey, though if your property is older, you may want a more thorough one.

Legal and conveyancing

Conveyancing is the legal process of transferring property ownership from the seller to the buyer. Your conveyancer will organise for the funds to be transferred to the seller on completion day.  

Completion and moving in

Once the funds have been transferred, you are able to pick up your keys. Completion can’t happen until the lender receives the Certificate of Title – a document outlining the property’s history and legal description – from your solicitor. Before the lender releases the money, they will check your circumstances one last time, to make sure everything is still in order.  

Post-completion

As you settle in, and get used to your new home, remember to keep on top of your mortgage payments. And be mindful of the continued upkeep of your credit rating. You’ll be credit checked when you come to apply for a remortgage. When it comes to making your first mortgage payment, you’ll receive a letter from your lender, confirming the amount and the date it needs to be paid by. This first payment may well be higher than future payments as it will take into account interest accrued between the date of completion and the end of that month, in addition to your regular monthly payment for the following month.

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FAQs

What are my chances of having my mortgage approved?

Whilst there are no guarantees, proving you know how to manage your finances, maintaining a high credit score and growing your savings will all help increase your chances of being approved.

What could delay the process?

Often, waiting for mortgage application documents can hold things up.

Are photographs of documents acceptable?

Generally, original ID documentation is required. It’s typically accepted to submit copies of other documents. A qualified mortgage broker would be able to advise you on this.

Additional resources

We have various resources available to help you, including our latest news, more FAQs and a range of mortgage calculators. Feel free to look through them or contact us for individual advice on your mortgage application.

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