How to apply for a Mortgage
You can apply for a mortgage using a mortgage advisor who will be paid a commission to put together all the information and help process your application from start to finish. You may also apply directly through your local bank or existing mortgage provider.
The provider involved will run through a series of credit and affordability checks to ensure that you are able to afford the monthly repayments without falling into financial difficulty.
For most buyers, this involves being able to calculate your monthly income, a key factor in determining how much you can borrow.
The mortgage lenders will calculate your household income, including:
- Basic salary
- Freelancing work
- Benefits, commission and bonuses you may receive from work
- Additional income
When applying for a mortgage, you need to provider a series of documents to prove your identity and employment. The documents you will need to make an application include:
- Utility bills from your existing address
- 3 months worth of payslips
- Prove of identity such as a drivers licence or a passport
- Bank statements of your current account from the last 3 to 6 months
- P60 form from your employer
- Proof of benefits received
- People who are self-employed should provide a tax return form and bank statements which support their income.
Applicants will be run through a credit checking system using information from the three main credit reference agencies in the UK: CallCredit, Equifax and Experian. The insight into your credit history will demonstrate how well you have repaid other types of finance in the past.
You will need to calculate how much you can contribute and put down towards owning a property. This is typically your personal savings and any additional funds from parents or other family members. The remaining sum is the amount that you need to borrow from the mortgage lender.
Example: You have a deposit of £100,000 and wish to purchase a property of £500,000. This means that your deposit is 20% and you will need to borrow the remaining 80%, known as your loan-to-value.
The loan-to-value is how much you need to borrow in relation to the property. The typical amount you can borrow is around 50% or 60%, with 80%, 90% and 100% mortgages available too. The highest amounts are typically reserved for those that demonstrate the lowest risks to the lenders including strong credit histories, incomes and the use of a guarantor.
Decision in principle
If your application has been successfully approved, you will be given a 'decision in principle' from the lender stating that you can borrow a specific amount. From this point, potential homeowners will know their budgets and can start house-hunting knowing that their application will be fast-tracked because the mortgage lender has already provisionally approved them.
Things to consider
- How much you will need to borrow
- How much deposit you have
- What you can afford to repay each month
- When you would like to pay it off by e.g 15 years, 25 years or 40 years
References by Bridging Loan Hub
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