The Application: Overview and Mortgage Application Process

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Part 2 of Beagle Street’s Home Buyers’ Guide is all about the mortgage application. This is split into two pages:

Mortgage Preparation

This outlines the documents you’ll need to prepare in order for a smooth application, including:

  • Preparing Documents:
    • Passport or driving licence
    • Pay slips and P60
    • Utility bills
    • Bank, credit card and savings statements
    • Gift letter
    • Any self-employed accounts
    • Evidence of any benefits received – child maintenance, child benefit, disability benefit

It also explains the importance of a credit rating and how to check it.

Applying for a Mortgage

This gives an overview of how to make the application itself, with objective comparisons between:

  • Applying by yourself
  • Using a mortgage adviser/broker:
    • Types of brokers
    • Pros and cons
    • Mortgage in Principle
  • Costs

It also gives information on the ‘Mortgage in Principle’ and how to obtain it.

Goal

By the end of Part 2, you’ll be fully clued up on:

  • What documents you need, and how far back your filing needs to go
  • How to check your credit score
  • The pros and cons of using a mortgage broker and how to make a mortgage application
Beagle whispering to Street

Mortgage Preparation

This page in the Beagle Street Home Buyers’ Guide is for those who have decided to buy, sourced a deposit, prepared for additional purchase costs and chosen whether or not to use a government scheme to help them onto the housing ladder.

The next step in the process is preparing for a mortgage application. In this section you’ll find out about:

  • Preparing documents for the application
  • Credit checks

Preparing documents

They say that buying your first home is one of the most stressful times in one’s life. No matter how well you plan, delays are inevitable: your solicitor may be on holiday, the seller may up the price, offers may be rejected, there may be problems with the property…

Unfortunately, there’s little you’ll be able to do to prepare for them. However, preparing paperwork in advance could help lower stress levels.

Note: if you are buying with someone else, both of you need to present this documentation

No matter whether you are making use of a government scheme, or you’ve built up enough deposit to kick off a mortgage application without a 3rd party, you’ll need to have a number of documents at the ready to send across. They are as follows:

Passport copies

  • Is your passport close to expiry?
  • Make sure it is renewed and you have copies to send across.

Driving licence copies

  • Is your driving licence close to expiry?
  • Make sure it is renewed and you have copies to send.

Utility bills

  • Are you sharing a flat with others or living at home?
  • Having your name on at least one utility bill should be a massive help when submitting a mortgage application.
  • Mobile phone bills do not count: you’ll need to have something from a supplier such as a gas, electricity or water bill.
  • Your bill must be dated within the last 3 months.

Pay slips

  • Ever throw away your payslips? Don’t. Save yourself the hassle and start filing these away. Generally, you’ll need the last 3 months of payslips and a P60.

Proof of deposit

  • Ever throw away your statements? Again, don’t! You’ll probably start noticing a similar theme here, but filing is going to become your friend. Even if you use online banking, print outs may not always be acceptable to your mortgage provider and you may have to request printed statements from your bank, which could take time.
  • Whether your deposit is coming from your bank account, savings account, shares or an ISA, it all needs to be documented and proved to a lender. Where available, you’ll need to send across the last 3 months of statements.

Bank statements

  • Keep your statements!
  • Yet again, you’ll need to show all outgoings and be able to prove that your salary is regularly coming into your bank account.
  • Once more, you need 3 months-worth of statements.
Beagle talking to Street

Gift letter

  • Being given money towards your deposit? This is actually part of ‘proof of deposit’ but could be so tricky, we’ve added it as a separate point:
  • If you’ve been given some money from a friend or family member to put towards a deposit, you might need to prove this with a gift letter and, in some cases, also request bank statements to prove this has left the donor’s account.
  • Each lender may request a different template, but generally it must:
  • Be on headed notepaper
  • Be addressed to the mortgage lender
  • Confirm who they are gifting the money to
  • Confirm their relationship with you
  • Confirm how much they are gifting
  • State whether there might be repayment or not and, if so, on what terms
  • State whether they have any interest in the property

Credit card statements

  • Do you have a balance to pay?
  • In most cases you’ll need to provide credit card statements from the last 3 months.
  • Having a balance to pay might affect your application. Wherever possible, try to get this to £0 and keep it at £0.
  • If you’re someone who pays your credit card off monthly, be careful. Even though you have paid off your bill, some lenders may want to see the evidence of your credit card statement showing a £0 balance. This means you may have to wait to receive your statement.

In most cases, that completes all the requirements for documentation. Any small discrepancy could delay your application, so if you could get into good filing habits before you start looking for a property, you might feel much calmer.

Credit checks

Ok – you’ve built up your deposit. You’ve prepared all your documentation. You’re ready to get the best rates, right?

Unfortunately, it’s not as easy as that. Credit rating is essential for getting the best deal possible. Therefore, first things first, get yourself signed up to a credit rating company.

This could cost £14.99 with Experian [1], but there is also a new system that is absolutely free, called Noddle. Check out this helpful article on Money Saving Expert which evaluates your options.

Ideally, you want to get yourself into the ‘Excellent’ category. This might be tricky – the smallest things like not having a full record of your addresses, being on the electoral roll or discrepancies on using your middle name could have an impact. Luckily, all these are amendable.

This should be a main priority before approaching a lender. And as scores are affected by amendments, the right changes could see an upturn in your rating within weeks, sometimes even days.

Next Steps

You’re almost there! There’s one more chapter to go before you’ll be able to comfortably start looking for a future home that you might actually afford.

Now you know what you need to have in place to maximise your chances of getting a mortgage application accepted, the next chapter describes how to physically make the application.

Previous page

Planning To Buy – Knowing The Costs

Next page

The Application – Applying For A Mortgage

Appendix

  1. Experian – How much does CreditExpert membership cost?

Sources

  1. Money Marketing – Statement of intent – 30th January 2014