How to make a successful mortgage application
How long will getting a mortgage take and how can I prepare myself? Whether you're applying for your first mortgage or remortgaging, here's what you need to know...
Expect to be asked detailed budget questions
The tougher regime in the mortgage market and changes following the Mortgage Market Review have been well documented. A key foundation to the rules is for lenders to ensure that a mortgage will be affordable, not only now but in the future when rates may be higher.
That means that borrowers should expect more questions about not only their income but also their outgoings when applying for a mortgage. That goes beyond other credit commitments like personal loans and credit card balances into a more detailed budget planner.
Top tip It pays to sit down and break down your monthly spending patterns so you have a clearer picture of where your money goes
“How much do you spend on a haircut?”
Although some headlines have suggested that every last penny should be accounted for, in the main lenders will stick to central items of committed expenditure. That will mean breaking down spending on items like utilities, food, council tax, travel costs and insurances. Other points that can have a significant bearing on how much you can borrow are number of dependants, childcare costs and in some cases pension contributions.
Rather than getting into minutiae, a lot of lenders will use statistical data to cut down on the level of detail they need. They will make assumptions about what expenditure they expect a borrower with your profile to have. Lenders will be checking your credit rating. See our tips for improving your credit score
What documents do I need to hand?
Other lenders will go through bank statements in more detail and may ask for explanations of any, especially large or regular outgoings. In addition to requesting bank statements lenders will also want to see evidence of income to back up the application.
Having payslips, P60s or accounts or SA302s, if you are self employed, gathered together will mean that you can provide a better packaged application to help ease the processing. Lenders may still come back for additional information, for example a first time buyer may need to provide proof that the deposit from Mum and Dad is a gift not a loan.
How long will my application take?
The new processes have meant that applications can take longer and borrowers should really expect it to take 4 weeks to get their mortgage offer. With a busier market there have even been some delays in getting surveys completed. See our guide on how long does it take to get a mortgage
Although things can be more involved now, the new rules are here to stay. However, it’s important to remember that lenders still take different approaches to how they view individual borrowers. So get the detail correct and your adviser will be able to tailor the recommendation to the right lender for your needs.
We’ve always been of the opinion that the days of popping into your local bank to get the best mortgage deal are over. Homeowners in the know understand the value of shopping around and taking advantage of professional expertise. That’s why we recommend using a mortgage broker.
Top tip Look for a mortgage broker who doesn’t charge a fee for their advice.