Making the decision to get on to the property ladder is a huge step in anyone’s life and it can be a confusing time at best. What with the various fees that need to be paid, liaising between your financial advisor, conveyancer and the estate agent and the myriad of administrative tasks that need to be completed, it is enough to blow anyone’s mind. In this guide, we will walk you through the process of applying for your first mortgage, it is a lot simpler than you’d expect.
Get Advice
This is perhaps the most important piece of advice we can give. Contact an independent financial advisor (IFA) or mortgage advisor to discuss your options. The market for mortgages is very confusing, is a variable rate best? If so, is it a standard variable rate, a tracker rate or a discounted tracker rate? Is a fixed rate best? If so, how long for? What about mortgage product fees? Good thing or bad thing? Is the lowest interest rate always the best product? There are lots of questions that need to be answered and chatting to an advisor is always best. What does that mean though? Essentially, an advisor is someone who has access to the mortgage market but who is not affiliated to any one mortgage provider. Now, this does not mean that they won’t get a fee paid to them from the mortgage company if they make the introduction and the mortgage is agreed, quite often they will. They do, however, need to let you know this. Your IFA or mortgage advisor will need to take your identification for anti-money laundering reasons, they will then ask you to fill out a basic form detailing your income and detailed outgoings. This will help them understand what sort of mortgage you can afford. Typically, your advisor will also do a basic credit check as well to see what sort of lender they need to be approaching.
Once the advisor has all the information they need, they will carry out a market search and discuss different options with you and give you guidance. Ultimately, though, the decision of which mortgage and which lender to go for lies with you.
Decision in Principle
When looking to buy a property, it often makes sense to have a decision in principle from the mortgage provider as this shows you are serious and could almost certainly secure a mortgage for the property you want to buy. What is a decision in principle though and how do you get one? In essence a decision in principle is a statement from the lender that, subject to you being able to prove everything that you have told them, they would be prepared to lend the sum they say on the statement. So how do you get one? The mortgage lender will send a form, which you will need to fill out. This will ask for identification, previous addresses, for at least the last 3 years, details of all household income and all household outgoings. You will need to fill this in accurately. Remember that when it comes to the final application you will have to prove everything you have submitted. Based on the information you give them and a credit check, the lender will give a decision in principle. Your advisor can help with all of this. It is important to note that a decision in principle is not a guarantee that you will get a mortgage and, even if you can prove everything, if the lender’s lending criteria changes, they could still reject you at the time of the full application.
Full mortgage application
Once you are ready to proceed you will need to make a full application. Again, your IFA can help you with this. You will need documentary proof for your finances and identity though. So, your lender will want to see your passport, proof of address from a recent utility or credit card bill. They will also want to see several months’ worth of bank statements (typically 2-3), several months’ worth of payslips (typically 3), evidence of regular bonuses and credit card statements and evidence of your deposit. If you are self employed, they will want 2-3 years of certified accounts registered with HMRC. Your lender might ask questions around certain income or outgoings so be prepared to answer questions on the information you submit. All documents need to be original.
Once this has been submitted, the lender will review your application and give you a firm mortgage offer in writing or reject your application. If you are accepted, the lender will need to see appropriate insurance documents for the property, before they release the funds at completion.
In all the application process is relatively easy, using an advisor will help the process run smoothly and ensuring that you have all the documents that you need also makes things a lot easier.
At Belvoir we can introduce you to the Mortgage Advice Bureau who are able to provide expert mortgage advice and who also have access to mortgages that are not available on the high street. So if you are looking at buying a property, why not pop in and see us, we are your one stop shop to the home of your dreams.
NB Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
