Below is a simple step by step guide into the mortgage application process. It explains the necessary steps you will need to take, from start to finish; finding a property to completion.
Step 1: Find a property
The first step is to find a property that you wish to purchase. This can be done via an estate agent, auction or private sale. Once you have the knowledge of how much it costs, you will then be in a position of knowing how much you will need to borrow. If you have finances available to use as a deposit on a property, it will increase the chances of finding a better rate for a mortgage and you won’t have to borrow as much money.
Step 2: Get a decision in principle (DIP)
It is possible to get a decision in principle from a lender before you have chosen your final property. By doing this, it shows that they would be willing to finance the loan and how much they would be willing to give you. There are a few factors, which determine this:
• Your income
• Current employment status
• The property you wish to purchase
You may obtain a decision in principle online as well as through the post. All applications process a credit check, which shows on your credit record. If you apply for many of these, it may affect your chances of getting a mortgage. It is because of this that the best way to apply is when you have selected your loan provider.
All details that you give must be correct and true at the time of applying.
Click here for more information on finding a lender
Step 3: Choose a solicitor / licensed conveyancer
The whole process of purchasing a property may seem a daunting task for many people, which is why someone will be required to deal with the legal side of things; local searches, contracts and other legal documents etc. A conveyance solicitor or a licensed conveyance could be used. Certain lenders have preferred solicitors or may be able to recommend one to you. It may be useful to search online or carry out a local search via the phone book.
Step 4: Make an application
Having chosen the property that you wish to purchase, you would then make a full mortgage application by completing and returning the lender's forms. They will usually want to see evidence of your income, your identity, current address and possibly a reference from your previous landlord (obviously the latter will not be relevant if you are a first time buyer moving from you parents home). Other fees may be required for payment to cover the costs of the property valuation. However, this should be explained in full before any application is made.
Step 5: Carry out reference checks
The lender may wish to get written references from your current employer and/or bank, current landlord (if applicable). They will also run credit checks to view your previous credit history. Having bad debts or a county court judgement (CCJ) may harm your application.
Step 6: Have the property valuated
The lender will, in most cases, have the property valued to make sure it is worth the price you have agreed to pay. If, for some reason the valuation comes back as saying the property is worth less that the agreed price, it may affect how much the lender is willing to borrow you.
Step 7: Receiving a mortgage offer
If, after the property is valued and the lender is happy with the valuation, your credit history and references etc you will then be made a formal offer. A copy of which will be sent to your solicitor. Once these forms have been signed and the documents returned, the lender is then committed to providing you with the money. In most cases, the mortgage offer will require that buildings insurance is setup to protect you in case something happens to the property before the mortgage is paid off.
Step 8: Exchange and completion
Once you have received a formal mortgage offer from the lender, your solicitor will then agree a date for the exchange of contracts with the solicitor representing the seller of the property. It is at this time that you would then usually pay a percentage of the purchase price as a non-refundable deposit and agree to pay the remaining balance on the date of completion.
