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Getting a mortgage

Applying for a mortgage

By Marie Kemplay

Article 5 of 10

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Applying for a mortgage

Not sure how the mortgage application process works? You're far from alone. Find out the steps you need to take when applying for a mortgage

Video transcript

Mortgagees can seem confusing, but they don't have to be. Here we talk you though the steps you'll need to take to get one. First work out how much money you have for a deposit, you'll need to think about all the other expenses involved in buying a house, such as stamp duty, legal fees and moving costs.

Once you've considered these the amount you have left could be a lot smaller, bare in even if you have a lower deposit, you'll probably have to pay a high interest rate. Next think about how much a mortgage lender would be willing to lend you, this is normally between three and five times your annual income.

Add on your deposits and that will give you a rough idea of how much you can afford. Most importantly think about how much you can afford to pay back each month, by working our budget of incomings and outgoing costs. Not only will this help your plan but your lender will expect to see these details to prove that you can afford to pay back what you want to borrow, before you apply for your chosen mortgage is worth checking your credit history with credit reference agencies such as Call Credit, Equifax and Experian then correcting any errors or working to improve any bad credit history such as missed payments on your credit card, finally when it's time to apply get all the documents ready that you need to prove you're mortgage worthy, such as payslips and bank statements as the lender will want to see these.

Everyone is different so speak to a Which? mortgage adviser to hear expert, impartial and independent advice to fit your circumstances, they can even manage your mortgage application for you too.
  For personal, expert advice based on your individual financial situation, call Which? Mortgage Advisers on 0808 252 7987.

How to apply for a mortgage: step-by-step guide

Step 1: Work out your budget

As with any big-ticket purchase, the first step is figuring out how much it's likely to cost. You don't need to have chosen a specific property at this stage, but you do need to have a price range in mind. 

Use prices advertised on property portals such as Rightmove and Zoopa to see how much properties cost in the area where you would like to buy.

Once you have an approximate price in mind, look at the total size of deposit available to you. This might include your savings or a gift from your parents.

You can then calculate how much you would need to borrow on a mortgage to buy your ideal property. Keep in mind that mortgage lenders will typically only lend you up to 4.5 times your income. 

It's also important to work out your loan to value ratio or LTV. This is calculated by dividing the total amount you plan to borrow by the property price. Banks will use the LTV to determine which rate to offer you. Generally, your LTV needs to be at least 95% to qualify for a mortgage. 

You can also have a free initial consultation with Which? Mortgage Advisers by calling 0808 252 7987. They will ask you questions about your circumstances to help give you an idea of how much you might be able to borrow.

Find out more: How to save for a mortgage deposit – our guide to building up healthy savings 

Step 2: Consider if you're mortgage-ready

Ask yourself: would you be attractive to a mortgage lender if you applied now?

Although lenders have different criteria, there are things all lenders expect from borrowers. 

A good credit history is crucial to being accepted for a mortgage. If you have a poor credit history, or no history of using credit at all, you will need to spend some time improving this before applying for a mortgage.

It also helps if you can demonstrate that you are in steady employment, with a regular income. If you have recently changed jobs it may be a good idea to wait until you have been in the role for six months before applying. 

Find out more: How to improve your credit rating – how to make yourself look more appealing to lenders

Step 3: Find a mortgage 

If you're ready to buy, you need to find the right mortgage deal for you. There are lots of things to consider e.g. would you be better getting a fixed rate mortgage or a variable rate? How long should your initial deal period be? Two years, five or even ten?

A mortgage broker can help you to make these decisions. They can give advice on which providers are most likely to accept your application and what type of product will best fit your requirements. 

Getting professional mortgage advice is an especially good idea if you are a first-time buyer, and have never taken out a mortgage before. 

You can also find mortgage deals yourself by shopping around online or speaking directly to different lenders.

Find out more: How to choose a mortgage broker - get help to find the best mortgage deal for you

Step 4: Prepare documents for your mortgage application 

Once it's time to submit the application, make sure you have all your paperwork ready.

You will need to provide evidence of:

- Proof of  ID

- Details of your employment

- Up to six months of bank statements

See the checklist below for full details.

Which? Mortgage Advisers will search a wide range of mortgages from all available lenders in the whole of the market, and also advise you whether there are any direct deals you could get by approaching a lender yourself. You can call them on 0808 252 7987

Step 5: Make the mortgage application

Mortgage decision in principle

Once you have found a mortgage deal that suits your circumstances, the next step is to get a 'decision in principle'.

At this point, a lender will agree that, in principle, it will give you a mortgage, subject to final checks and approval of the property you intend to buy. 

If you are using a mortgage broker they will submit the application for you.

Generally, a 'decision in principle' does not involve a full credit check. This means the lender has not formally agreed to lend to you at this stage. 

A lender will only formally agree to give you a mortgage once it has done a full credit check and you can provide details of the specific property you would like to purchase. 

A mortgage 'decision in principle' is helpful as it helps to show sellers that you're a serious buyer and also will speed things up once you've put in an offer on a property.

Each lender is different, but a 'decision in principle' will typically last for six to nine months. If your property search takes longer than you planned, you may need to get a new 'decision in principle'.

Formal mortgage application

Once you have made an offer on a property, you will formally apply for a mortgage with your lender.

If you are using a mortgage broker, they will arrange this for you. 

The mortgage lender will conduct a valuation on the property you intend to buy. This valuation lets the bank confirm that the property is worth what you intend to pay for it. 

The lender will also do a thorough check of the paperwork you have provided and your credit record. This search will appear on your credit file. 

If a lender turns you down at this stage, it is worth considering your options before applying for another mortgage. Making several mortgage applications very close together could do significant damage to your credit score. 

If a lender is happy with your application, it will make you a formal mortgage offer. 

Once you have a formal mortgage offer, your conveyancer will arrange for the mortgage funds to be transferred from your mortgage lender to the person you are buying the property from. 

This will happen on the 'completion' date for your property purchase. 

Find out more: Exchange and completion - the two most important steps when buying a property

Checklist: mortgage application

Our easy-to-use, printable checklist will guide you through the paperwork you'll need to get together.

  • Last updated: May 2017
  • Updated by: Marie Kemplay
 
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Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.