Getting a Mortgage

Ok, so, how do you get a mortgage, particularly a first-time buyer mortgage? In reality, it’s a long and detailed process with a lot of different parties and paperwork involved.

The following is a snapshot of how it works, enough to give you a feel for what to expect.

Ok, so, how do you get a mortgage, particularly a first-time buyer mortgage? In reality, it’s a long and detailed process with a lot of different parties and paperwork involved.

The following is a snapshot of how it works, enough to give you a feel for what to expect.

Finding a mortgage lender

First, you’ve got to find someone willing and able to loan you the money you need. Here, you’ve got two main options, each with their own pros and cons.

Applying direct to a mortgage provider cuts out the fees of a middleman and lets you choose direct from the provider’s range of products. However, you’ve only got your own knowledge of mortgages and your Google skills to guide the final decision.

Using a mortgage broker or independent financial advisor can help guide you in making a more informed choice. But on the other hand, the advice of a qualified expert is unlikely to come for free.

Execution-only mortgages

If you decide to apply for a mortgage loan without getting the advice of a broker or other financial expert, this is known as an execution-only mortgage. These are offered under limited circumstances.

First, your mortgage provider will write to confirm that you’ve not received any advice, and that the mortgage you choose hasn’t been professionally assessed for its suitability.

In some cases, you’ll need to confirm you’re aware of the consequences of taking out a mortgage without receiving advice and that you’re happy to go ahead.

If you are indeed happy to go ahead, you’ll need to know:

  • what type of mortgage you want
  • the property you’re buying
  • how much you want to borrow
  • the length of the loan term
  • what type of interest rate you want to borrow at

Learn more about arranging a mortgage yourself vs using a broker in our Homebuyer’s Guide.

The mortgage application process

Once your preferred lender is chosen, they’ll be able to finalise some decisions about your mortgage. First, you’ll be given a full breakdown of the products and services they offer, and at what cost.

You’ll also be asked some details about the mortgage you want, how long you want it for, and your general financial situation. This will inform the provider’s decision about how much they’re able to offer you.

Mortgage in principle

Using that very basic information, a lender might offer you a ‘mortgage in principle’, also known as a decision in principle, a mortgage promise, or an agreement in principle.

This is more or less what the name suggests, a declaration that the lender would, in principle, offer you a mortgage of a given amount, assuming the information you’ve given them checks out.

This isn’t the same as beginning the mortgage application process, but it’s a good start.

Some estate agents will ask if you’ve been given a mortgage in principle before you book a viewing. Having one can make you seem like a more reliable prospective buyer, and it can help kick off the process quicker once your offer is accepted.

But beware! This is just an offer in principle, it’s no guarantee that you’ll be accepted once the lender takes a closer look at your finances.

Getting a mortgage in principle also leaves a footprint on your credit rating. Some lenders only leave soft footprints, but some leave hard ones. Too many hard footprints in a short span of time can damage your credit rating and could hurt your chances of getting a mortgage in the long run.

You can learn more about hard vs soft inquiries on your credit score from Experian.

Kicking off the application

Having found a lender and a property, the application can finally begin.

Your mortgage provider or broker will carry out a full, in-depth affordability assessment, taking into account things like:

  • The value of the property you want to buy
  • The size your deposit, this can affect your loan-to-value ratio
  • Your age
  • How long you want the mortgage term to be
  • Your credit score and history
  • Your income, including annual salary and anything else you receive
  • Household outgoings, including credit cards, other loan debts, household bills and general living costs
  • Whether you’re applying jointly or on your own

 

All being well, your offer will be accepted and you’ll receive a binding offer, with a reflection period of at least seven days.

During the reflection period, you can think things over and make sure you’re totally happy with the lender’s offer before accepting it and entering into a legally binding agreement.

This is a good time to browse and compare other possibilities, which you can do on various price comparison sites. You can also get independent financial advice about whether the offer you’ve been given is right for you.

Next page

Type of mortgages

Next page

Help for first-time homebuyers

Appendix