How the Application Works
Mortgages
Applying for a mortgage and buying a home, especially if you are a first time buyer is a very stressful event in anyone’s life. Knowing what to expect and having the right professional people help you through the process can not only make things a lot easier, but will most probably ensure that you find the home that you want at the price that you can afford. A mortgage application involves several steps and takes on average about two months to complete (this depends on various external factors within the process, so this guide time should only be taken as a rough estimate).
The amount you will be able to borrow is determined mainly by your income and your expenditure. The process for determining this amount varies from lender to lender, but normally you can borrow between 3 and 5 times your income on a single application, and 2 and 4 times your income on a joint application. It is possible to ad up to four applicants on one mortgage. Other factors that can affect your success are your residential status and the amount of deposit you have available to put down. Affordability has become a major measurement tool for banks in determining whether you will qualify for a mortgage and how much they will lend to you. Your credit record also plays a significant role in the success of your application and which mortgage product you will qualify for. Where possible, manage and protect your credit record at all times as it is a valuable asset.
- Step 1:
Ideally you would want to make an appointment with your independent mortgage advisor before you start the search for your dream home. During the appointment you will discuss everything you need to know to approach the process of buying your home with well informed confidence. You will know how much you can afford, what your monthly payments will be, how much you will have to save to pay for expenses related to the mortgage (stamp duty, deposit, etc) and a thorough understanding of the jargon surrounding the process. If you require, your advisor will be able to do a decision in principle at your chosen bank on your behalf and this will give you the piece of mind that you have preliminarily been approved for your intended loan amount. You will understand the timeline of the process and when what will happen. We have created a frequently asked questions page to help with any other questions you might have. - Step 2:
A lot of research is necessary to find the right property and websites like www.righmove.co.uk or www.your-move.co.uk can be very helpful as they provide access to 90% of properties on the market in a specific location. You should also register with Estate Agents in the area. If the estate agent requires proof that you will be able to afford a property that you are viewing, provide him with your advisors details, which will be more than happy to discuss this with the agent. Do not let the mortgage advisor within estate agencies do any credit checks on you or your partner as this will leave footprints in your credit record that will influence your final mortgage application negatively. Do not get discouraged if after the first few viewings you have not found anything that fits your requirements, it can take up to 40 or more viewings before you find the ideal property. - Step 3:
Once you've found your ideal property; make an offer, usually to the estate agent. Should your offer be successful, it is time to contact your mortgage advisor to start with the full mortgage application. At this time you will also be asked the details of the solicitor that will be handling the purchase on your behalf. Speak to your advisor if you need help in this regard, he/she will be able to refer a qualified solicitors’ firm that specialise in conveyance work. Having a good solicitor will ensure the process moves smoothly, besides the legal work and protection they provide.
From here on in the process will mainly be handled by your advisor and solicitor and you will only be required to provide various documents like payslips and proof of identity. The bank will instruct a valuer to do a valuation of the property; this is to ensure that you do not pay too much for it and there are no major defects that will affect the value of the asset. There are three levels of valuations and you will have to choose a particular level upon completing of the mortgage application. Your advisor will discuss this with you in detail. If the valuation report is satisfactory and the bank is satisfied with the proof of your income, it will issue a final mortgage offer. The mortgage offer sets out all the terms and conditions in relation to the mortgage and is a final acknowledgement from the bank that it is willing to provide you with a loan to buy the property.
You will be expected to pay the deposit on the date of exchange. Stamp duty and the remainder of the Solicitors Fees will fall due on the date of completion. Exchange occurs when all the outstanding requirements’ are met and both parties’ solicitors are satisfied to exchange contracts. Exchange is the physical exchange of contracts by both the seller and buyers’ solicitor’s. At this stage you will also be expected by your solicitor to provide proof of buildings insurance if you are buying a freehold property and any life insurance taken out to cover the outstanding debt will have to be placed on risk. After exchange you are not yet the owner of the property, but bound to a legal contract to complete on the date set out before exchange. The date of exchange is usually a few days before completion when you will receive they keys and you can move in.
The Application Process
The diagram below shows the steps involved in the mortgage process. Hold your mouse over each box to see a more detailed description.
