Buying a home, whether that’s your first house or your next house, is always an overwhelming time. There are so many parts to a mortgage and acquiring your home, not to mention the emotions that come alongside one of the biggest life experiences.
If you are a first-time buyer, the application process can be especially daunting, so, as an established and trusted mortgage advisor in Manchester, we have created the below easy-to-follow, 10-step guide on the mortgage application process, from preparation and planning to actionable steps, right through to owning your home.
Step 1 – Mortgage Ready Yourself.
Firstly, get your finances in order and check your credit score to ensure that it is as high as it can be. If it’s low you can improve it by paying off debts, getting onto the electoral register, even getting an interest-free credit card, and ensuring you make payments on time to show you are a reliable borrower.
Step 2 – Determine Your Budget.
After this, you can determine your budget, which includes the amount you need for a deposit, the amount you need to borrow, and the amount you need for additional fees and taxes. For a deposit, lenders will typically look for a minimum of 10% of the property value, this will also affect your LTV (loan-to-value) ratio, meaning the higher the deposit, the lower the LTV, and the lower the risk to the lender.
Lenders base borrowing on your income, typically borrowing 4.5 times your annual pay packet. So, if you earn £30,000 a year, you could borrow £135,000.
Step 3 – Find a Mortgage to Suit Your Circumstances.
The type of mortgage you get needs to suit your circumstances and mortgage type and length should be considered. Fixed-rate mortgages are the most popular because they aren’t affected by the base rate of interest, which as we all know, is volatile at the moment. There are also tracker and variable mortgages, alongside many more. It’s advisable to seek the help of a mortgage advisor as they have access to the entire market and can advise which products would be suitable for you.
Step 4 – Prepare Your Documentation.
Lenders need to see proof of your earnings, address, and identity and so will need you to provide the following:
- 3 to 6 months of payslips and bank or credit card statements to show incomings and outgoings, plus any regular expenditures such as car payments, loans, etc. They may also ask for proof of your deposit.
- Proof of employment in the form of your P60 and if self-employed then details of your accounts and tax assessments from the last 3 years.
- Proof of identity in the form of a driving license or passport showing your current address.
- 2 documents including utility bill, bank statement, or council tax bill, to show proof of address, dated within the last 3 months.
Step 5 – Mortgage in Principle (MIP).
A mortgage in principle is a certificate from a lender which shows how much you could borrow, from evidence of your finances, and how much deposit you’ve saved. Taking this to house viewings could put you in favour over other viewers as it shows that you are a serious buyer.
Step 6 – Find a Property and Make an Offer.
Your mortgage in principle won’t expire so this is the fun part where you can start house hunting and find the right property for you. Already having a MIP puts you in favour of those that don’t, so if the house you're interested in has a lot of interest, it could be sold in your favour.
Step 7 – Agreement in Principle (AIP).
This is a document that outlines that the lender is happy to borrow the specific amount for your desired property. They will look at all the areas detailing your finances and assess that the house is in fact worth what it is being sold for. This step could take anything from a couple of days to a week, and if you find your mortgage approval is declined, you are able to ask your lender why, so that you can solve the problem before you reapply.
Step 8 – Solicitor or Conveyancer Consultation.
After a successful agreement in principle has been accepted, it’s now time to find a solicitor or conveyancer to ensure that there are no structural faults or legal issues with the property, the property is worth what you’re paying, you can afford it, and understand your legal responsibilities, and formally confirm the deal between you and the seller once your mortgage is confirmed.
Step 9 – Make a Formal Mortgage Application.
This is where the process slows down and your lender sorts all documentation, conducts a valuation of the property, and processes your application, taking around 4 to 6 weeks. If unfortunately, you find you are declined it could be that there is a problem with the property itself, they deem your offer too high for the property value, or they have discovered something you did not disclose about your financial history.
Step 10 – Exchange of Contracts.
This is the point when your solicitor and your seller’s solicitor agree that all paperwork is correct, they exchange contracts, and your lender can go ahead and send through the mortgage money. After this the property is legally yours, you can collect your keys and move in!
Stress-Free Mortgage Application with an Independent Mortgage Broker in Manchester.
We are a specialist mortgage advisor in Manchester, covering the whole of the UK, whose expert team has years of experience helping those in need of mortgage guidance. So, whether you're stepping onto the property ladder for the first time, or are looking to remortgage, get in touch today with our friendly, helpful, and knowledgeable team. We are your expert mortgage advisor in Manchester and we’re waiting to help you.
