There are three stages to successfully applying for a mortgage - getting an agreement in principle, submitting a full application and gaining confirmation of your mortgage offer.
Getting an agreement in principle
Getting an agreement in principle can be a relatively simple task, but is one that is very worthwhile doing before you get too attached to the idea of buying a property that is on the market. Although you can get an agreement in principle on the web, over the phone, or in person, this is usually followed up by a written quotation.
The full mortgage application
Full mortgage applications can be quite time consuming to complete, owing to the level of data required by most lenders. The application standardises the assessment of whether you meet the lender's underwriting criteria. These criteria are set to ensure that barring any unforeseeable change in circumstances, you will be able to support the mortgage and meet the repayments.
The basic factors that they will be looking at are as follows:-
Earnings and employment status
How much you earn is pretty important when it comes to trying to pay back the loan. Lenders prefer you to have regular steady employment that is consistent over a fair period of time. Some may require you to have been in your current position for up to six months.
Some lenders will take into account all forms of income, while others only consider guaranteed income.
You normally need to prove your income by showing anything up to six months wage slips. If you are self-employed, the standard is to accompany your documentation with audited accounts.
The reason you must show your bank statements is to help the underwriters identify anything in your current expenditure that may impinge upon your ability to repay the loan. They want to know about any other mortgages, debts, credit cards, HP agreements, loans, overdraft facilities, maintenance and court orders.
Your equity in the new home is the amount of your deposit (i.e. the amount you can put in without borrowing). The bigger your deposit, the lower the proportion of the loan in comparison to the property value. This is known as "Loan to Value" or LTV for short). The less that a Bank has to contribute to a property the greater their security and willingness to lend you the money will be.
Banks want to be as sure as possible that your identity address and purpose of the borrowing are bona fide and that you are not going to defraud them. You will therefore have to show proof of your identity. This will include your Passport and a Utility Bill (not a mobile phone account)
A valuation or Home Buyers Report will be required to demonstrate that the property you want to buy is suitable as a security for a mortgage. Please see our section on SURVEYS.
Confirmation of mortgage offer
If you satisfy the Bank that your application is satisfactory, then you will receive a written confirmation of your mortgage offer. This is known as a "Facility Letter" or "Offer Letter". Some Banks require you to sign and return the confirmation some don't, so read their letter carefully.