How and when should I get a mortgage?
It can seem chicken and egg: you can’t buy a house without a mortgage, but you can’t get a mortgage until you're ready to buy a house. So how and when should you get a mortgage?
If you arrange your mortgage as early as possible, you’ll be in a stronger position with sellers. And, it’ll relieve a little stress from the home buying process. Leave it too late to get a mortgage, and you could risk losing your dream property.
When should I start applying for a mortgage?
The best advice is to start the process before you even start seriously looking for somewhere to buy. If you’re looking at properties before starting to arrange your mortgage, you’ve left it too late.
There are a number of reasons to begin applying for a mortgage before you start viewing properties or putting in an offer:
- You need to find out for sure how much you can afford. This is particularly important if you’re in a more complex financial position, such as being self-employed. Many home buyers end up losing a property because they couldn’t borrow as much as they thought.
- Starting the mortgage process early will help to avoid delays and problems with your mortgage. The secret to smooth home buying is to reduce the surprises as much as possible. See how long it takes to get a mortgage.
- If you have your finances in place, you’ll be at an advantage compared to rival buyers who do not have a mortgage in principle. Most estate agents and their home selling clients will expect you to have a mortgage in principle when you make an offer.
- If you are thinking about buying jointly with anyone (e.g a partner or parent) or buying with a friend, then this will affect the sort of mortgage you can get. And, how much you can borrow – so you should sort this out before you start looking.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
How do I apply for a mortgage?
If you’re looking to buy your first home, you should ideally start planning months before you apply for your mortgage. This is to ensure your finances are in good order and your credit rating is as good as it can be to make a successful mortgage application.
- Use our affordability calculator to work out how much you can afford to borrow.
- Depending on your finances, there are a number of government schemes to help you buy your first home.
- The next step is to decide what type of mortgage you need.
Check out mortgage products and best buys to see how much you can borrow once your deposit amount is considered. Take notice of how the deposit amount influences the loan value and the mortgage rates.
- When you are looking for a mortgage deal it is easy to simply compare the best interest rates. But, the mortgage fees and costs can make a significant difference to what you end up paying.
Think about using a mortgage broker. Some offer fee free advice and will search all the mortgages on the market to help you find the best deal, so it’s worth taking advantage of. Ask your current bank or building society what they would offer you. But, do not feel pressured to go with them if they don’t offer the best deal. Check to see if your employer provides mortgage deals, as these can provide great rates.
You should shortlist two or three deals that you like the look of, and that seem suitable, and then get a mortgage agreement in principle.
The mortgage agreement in principle
Obviously, you can’t complete the mortgage process until you have found a property to buy. Not least because the lender will need to do a valuation survey to ensure it is a good investment for them. All lenders will give you an indication of how much they are prepared to lend you and on what terms, given your circumstances.
Most lenders will go further and offer you a “mortgage in principle” after you have supplied them with the evidence they need of income etc. They offer this in the hope that you will use them as your lender once you find the property you want to buy and so you have evidence of having funds in place when you make an offer on a property.
To get your mortgage in principle you should:
- Start by comparing mortgages and finding the best deal, then request a mortgage in principle (sometimes called an agreement in principle) from the lender.
- Be prepared to give information about your income and expenditure. The lender will run a series of initial credit checks to see whether you are likely to meet their eligibility criteria. Do not be tempted to overstate your income as you will have to evidence this and it will only delay your application and downgrade the amount you can actually borrow.
- To issue a mortgage in principle, a lender will then need to run a credit check. Most will do what’s known as a hard search, which is when the search is recorded on your credit file. Multiple searches over a short period can be seen by lenders as a sign that you’re desperate for credit, which makes you a less attractive prospect and could impact your ability to get a mortgage. So don’t have too many checks.
The full mortgage application
Once you’ve had your offer on a house accepted, you have to complete a full mortgage application. If you already have a mortgage in principle, you will have covered much of the detail in the mortgage application. You will have to fill out a form and provide evidence of your income, identity, current address.
Your broker or lender will perform a full credit check on you to ensure you have a solid credit history and ensure you have paid your debts off in the past. They may also get references from your bank and employer.
You will also need to have a mortgage valuation of the property you are about to buy. Most lenders insist that you use their surveyors to do the valuation. The price of the valuation depends upon the value of the house being surveyed.
Some lenders will insist you pay for the valuation. Others will sometimes pay these fees for you, particularly if they are trying to attract you as a new customer. Some will be prepared simply to add these fees to the total for the mortgage, so you pay them off over time. While brokers and lenders should tell you what the fees are upfront, ask so you are fully aware of all the costs and don’t get any nasty surprises.
Note that the mortgage valuation is not a survey covering the condition of the property you are about to buy. See What sort of survey should I have?
What if my mortgage in principle is rejected?
If your request for a mortgage in principle is refused, it could be a sign that the lender doesn’t think you can afford the loan. You should find out why you were rejected and try to resolve the issue before you apply again.
It may be due to a poor credit rating. See our guide on Mortgages for Bad Credit to understand your options.
What do I do if my application is rejected after getting a mortgage in principle?
Some buyers may be given an agreement in principle, and then later find that their mortgage application has been declined. This can happen if a deeper credit search reveals something concerning, or if you fail to meet the eligibility criteria set by the mortgage underwriters. While this can be incredibly frustrating, it’s important to remain calm and find out why you were rejected.
If you can resolve the issue, you will be able to re-apply with the same lender. However, if you can’t fix the problem then you may need to go through the process again, which can put your house purchase at risk. Read more about what to do if your mortgage application is declined.
Can my mortgage be declined after valuation?
In rare cases, you could have a mortgage application rejected after the property has been valued by the lender. Typical reasons include the property being over- or undervalued, or being considered unsuitable security for the loan.
- Step by step guide to buying
- Gifted deposits explained
- First time buyer mortgages
- Government schemes to help you buy
- Mortgages made simple
- How long does it take to get a mortgage?
- Cost of buying a house
- How to make an offer and negotiate the price
- What type of survey do I need?
- The legal side of buying a home explained