If you are thinking about applying for a mortgage, this guide will help you understand what the process, what documents are needed and ultimately why a mortgage adviser is good for you!
If you were to lend your friend some money, would you calculate before agreeing, whether they can repay the money back to you, so you are not left out of pocket?
Well this is what mortgage lenders will do. When you ask mortgage lenders for money to buy a property, they will look at your household income (basic salary) and any additional income you have – (Second jobs, bonus’, overtime, commission, benefits, London Weighting to name a few).
But it doesn’t stop there, they will also want to check out your monthly expenditure. Lenders take all your household bills into account, along with any committed expenditure such as loans, credit cards and overdrafts. What is left every month is your disposable income – which you need to pay your mortgage from.
In addition, Mortgage lenders will also conduct a credit check to validate the information you have given them and to analyse your creditworthiness.
When applying for a mortgage, you should start collating the following documents
- Identification (passport or driving license)
- Proof of address (utility bill dated within the last 3 months)
- Employed applicants – latest 3 months payslips and P60
- Self Employed applicants – minimum 1 years but preferably 2 years SA302 Tax calculation with corresponding tax year summaries. If you are a limited company, a copy of your accounts for the latest 2 years would be beneficial.
- Bank statements of your current account for 3 to 6 months
- Bank statement to confirm deposit amount if you are purchasing.
These are the standard requirements but more often than not, mortgage lenders may ask for further documentation to access your application.
Most people ask us, why do we need to provide so much information for our application?
The short answer is that getting residential mortgages is within a regulatory industry. Banks have a duty to lend responsibility and by providing your information, they can access whether you can actually afford the mortgage you are applying for. More importantly, whether you can afford it in the future if the interest rates increase.
Every lender will have their own set of rules and criteria and how they access your information. It isn’t a one size fits all approach and it’s best to seek professional advice. We often speak to people who have gone to their own bank to discuss a mortgage. They may get declined, the bank won’t lend to them the amount they need or simply they don’t understand your employment and how you are paid. Also, your own bank may not offer competitive rates compared to others. You may walk away deflated but if you speak to a mortgage adviser, they have access to a comprehensive range of mortgage lenders and are best positioned to place your case successfully that is right for you!