Getting a mortgage can be a complicated and time-consuming process, and it pays to be both well prepared and realistic in your expectations before choosing a lender and beginning the application process. If you are looking for a mortgage because you want to buy a new house, there are many other formal processes that have to be gone through, such as conveyancing and property surveys, not to mention the time you will need to spend negotiating a price and getting the best deal possible.
The good news is that most mortgage lenders will be able to agree a mortgage, in principle at least, either over the phone or via the internet. The more time-consuming official application process can take place while you get on with all the other things that need to be seen to.
As with any major decision, don’t rush into choosing your mortgage lender. Take your time and shop around for the best deal, and type of mortgage, that will suit you. For more information on the different types of mortgage that are available see our Mortgages page. Also, be wary of estate agents who also offer to set up a mortgage for you, as these very rarely offer the best rates.
Applying for a mortgage
Assuming you have found a property and agreed a price, you need to secure a mortgage. Lenders tend to be consistent in the kind of information they require and the type of checks they perform before agreeing to give you a mortgage.
1. Your income
Lenders will want to know about your job and how (and how much) you earn. You will most likely need to provide evidence of earnings over the last few years, and this also applies to those who are self employed – see Mortgages for the Self Employed. As well as the amount of money you earn, the type of work you do and your potential earning power are of interest to mortgage lenders.
2. The property
Lenders will want to know details of the property that you are hoping to buy, specifically its location, age and condition. At a later stage you will very likely need to pay for a mortgage valuation of the property. This costs around £150, and is there to reassure the lender that were you to default on the payments it would be able to sell the property.
Your situation: Whether you are single, or will be taking out a joint mortgage, and if you have any dependents are all significant factors from a lender’s point of view.
3. Your history
Lenders will want to check your credit history, and find out if you have had any difficulties repaying loans or credit card debts in the past. See How to Get a Mortgage with Bad Credit for more details.
4. Your future
When you plan to retire, and therefore how long you will be earning at your current rate, is also a significant factor.
5. Your outgoings
Your average expenditure will be of interest to lenders, as will any debts or other loan repayments you have. Expect to be asked to show bank statements, payslips and other pieces of documentation in order to prove you will be able to pay back the mortgage.
How much can you get?
Based on the information you provide a lender about yourself a mortgage lender will be able to make a calculation on how much they are willing to lend you. This calculation is sometimes called an affordability check, and in many cases can be worked out by multiplying your income by three or four. They will also take into account the type of property you are interested in purchasing and the size of the deposit you have available. The larger the deposit, the more willing they will be to lend you money.
If you pass the lender’s checks, they will send you a formal mortgage offer in writing, confirming precisely how much they will lend, over how long and at what rate of interest. Using a mortgage broker or advisor is advisable if you are at all worried about not being accepted by lenders – they will be able to advise you on the best course of action and direct you towards the most suitable offer.