As soon as you’ve decided on a mortgage it’s a good idea to get a mortgage offer in principle from your lender showing how much they’re willing to lend you in principle. This demonstrates to sellers that you’re a serious buyer. However, it’s not a guarantee that the lender will give you the money. This will still depend on the exact details of the property, the accuracy of the information you’ve given, and the outcome of credit checks. The offer in principle will be valid for a limited time, usually up to three months.
To apply for one, you’ll need to complete a form giving details of your employment, income and financial commitments. The lender will run credit checks on you and will use this information to decide how much they are prepared to lend you in principle.
You then need to fill in a formal mortgage application with your name, address, income and other personal details. It will also require the name and details of the joint borrower if there is one. You will also need to work out the exact amount you need to borrow and provide details about the property you wish to buy.
The lender will want to know about your employment, specifically how long you have worked for your current employer and whether your employment with them is permanent. Some lenders may decline your application if you are not permanent, have just started a new job and are in a probationary period or if you are self-employed and cannot produce at least two years accounts.
Your potential Mortgage lender needs to know exactly what your income and they will ask to see your bank statements to verify whether what you have said is both true and accurate. Don't forget to mention things like bonus, shift allowance or benefits. The rule here is if you get income from somewhere, mention it. If the Mortgage lender can't accept it as part of your application they will tell you
The lender will want to know about any financial commitments you have elsewhere. This is likely to include credit cards, store cards, overdrafts or loans. Before you apply for a Mortgage get a list of all your financial commitments together. The lender will need to know how much is outstanding on each one and how much each one costs you per month.
When you apply for a mortgage, as well as checking if you can afford repayments, one of the key considerations for lenders will be your credit history. When your lender does a credit check on you, they will be able to see everything you have outstanding elsewhere and any failed credit applications. If you forget to mention something or you have multiple credit applications over a short period of time the Mortgage lender may decline your application. More information is available here.
If everything is in order you’ll get a mortgage offer letter. This is the official document that sets down the basis for the agreement between you and the mortgage provider. It can take 2 to 4 weeks to get to this point. You will then need to sign and return this to the mortgage company.
Whether you’re taking out a mortgage for the first time or remortgaging your property, your mortgage broker must provide you with a Key Facts Illustration (KFI).
You can also request an Agreement in principle (AIP) which will confirm the amount that, in priciple, the lender will provide you. It is NOT a mortgage offer but can help when dealing with estate agents before submitting an offer on a property and make you a more attractive buyer with the vendors.
Guides to how to apply for a mortgage are available at the following links:
The following links to tips and advice can help If you are having trouble getting a mortgage:
For advice on what to do if you can’t get a mortgage because of your credit history, click here.
A series of guides on all aspects of Mortgages are available from MoneyHelper.
A guide - "Issues with the property when buying a house" is available from MoneyHelper
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