If you’re a first-time buyer, then you’ll already know that it’s not easy to get on the property ladder in the current housing market. The value of deposits is increasing with property prices, and mortgage providers have all sorts of stringent requirements you’ll need to satisfy before they give you a loan, which can make things very tough for those applying for their first mortgage. To add to the confusion, the process of applying for a mortgage can be lengthy and drawn out, with lots of different stages and steps.
To help you make sense of it all, we’ve put together this guide, which will tell exactly how to get a mortgage. We’ll take you through everything you’ll need to do to satisfy your lenders’ eligibility criteria, then talk you through each step of the application process. We’ll cover:
- What do you need to get a mortgage?
- Credit rating
- How long does it take to get a mortgage?
- What is a mortgage in principle?
- How long does a mortgage in principle last?
- What do they look for in a mortgage valuation survey?
- How long is a mortgage offer valid for?
What do you need to get a mortgage?
To get a mortgage, you’ll need a deposit, proof of your identity and income, and a fair credit rating. Mortgage providers have strict lending eligibility criteria, which they use to ensure you can afford the repayments. A mortgage loan represents a substantial investment for the lender, often totalling tens or hundreds of thousands of pounds, so it’s only natural that lenders will need to assess each applicant carefully to safeguard their stake. In this section, we’ll run through everything you need to get a mortgage.
For many people, finding the cash for the deposit is the toughest part of getting a mortgage. House prices continue to rise year on year, and while this is great news for homeowners, it’s made things very tricky for first-time buyers, who now need to find the cash for huge deposits. The average deposit for a first home was a staggering £32,899 last year, so it’s little wonder that saving up is such a struggle.
The deposit is a lump sum that you pay upfront, which allows you to own a portion of the property outright. Paying a deposit lessens the risk for both the borrower and the lender, as it means that you won’t be in negative equity should the value of your home fall. Lenders will typically need a minimum 10% deposit before they’ll agree to give you a loan, although some, like the government’s Help to Buy Equity Loan, will accept a 5% deposit. You can also open a Help to Buy ISA to help you save: this is where the government tops up your savings by as much as 25% in order to help you save up the deposit faster. To learn more about this, take a look at our guide to the Help to Buy ISA.
While saving up for a deposit of this size might seem like an insurmountable task, it’s never impossible. Take a look at our guide to deposits to find more tips on how deposits work, including advice on how to save up.
It’s important to bear in mind that it’s not just a matter of saving up the cash: as part of Anti-Money Laundering Regulations, you’ll also be asked to provide your conveyancer with documents to show how you raised the deposit. So, if you’re going to set money aside each month, you’ll probably need to show bank statements to show the source of the funds. Or, if you’ll be receiving all or some of the cash from a relative, your conveyancer will need them to sign a letter to prove that the money is an outright gift and not a loan.
What documents are needed for a mortgage application?
Your mortgage provider will need to see evidence to confirm your identity and other basic details, and they’ll need to see proof of your income and evidence of your spending habits. So, before you fill out your application, you’ll need to have the following documents to hand:
- Passport or driving licence. Remember that this must be valid and in date, and the address on your ID should be where you are currently living.
- Proof of your current address (e.g. utility bills or council tax bills that have been sent to you in the post).
- Proof of any benefits you receive.
- P60 form from your employer.
- Payslips for the last three months. The lender may also contact your employer for a reference.
- Bank statements for the past 3–6 months.
If you’re self-employed, then you’ll need to provide the following documents to qualify for a mortgage:
- A statement of 2–3 years accounts from your accountant.
- An SA302 tax return (Tax Calculation & Tax Overview).
- Bank statements and other supplementary proof to support your tax return.
As part of the application process, you’ll also need to provide the details of the property you are purchasing, your conveyancer, and your estate agent. Before you instruct a solicitor, you should check that they are on your chosen lender’s panel of approved conveyancers, as it will hold things up later if you need to switch.
A fair credit rating
Mortgage providers will carry out an independent credit check in order to get an idea of your history of handling debt. There’s no magic number for what credit score you need to have to get a mortgage, but as a rule of thumb, the better your rating, the more likely you are to be accepted. It’s also possible that you’ll be able to get a better rate if your score is very good.
So, you’ll need to apply for a copy of your credit record well in advance, and make sure you’ve done everything you can to improve it: you can apply for a copy from any of the major credit-scoring companies for just £2. There are lots of simple ways to help build up your rating, from registering on the electoral roll to getting a credit-building credit card. You can learn more about this using the Money Advice Service’s helpful credit building guide.
While your rating will certainly have an impact on your application, don’t assume that you’ll never get a mortgage because your credit rating isn’t perfect. Every lender uses their own unique assessment matrix, and your credit rating is just one aspect of this: they’ll also look at other factors, like your income and deposit.
Even if you have serious credit problems, you might still be able to apply for an adverse credit mortgage. These are designed to help those with a less than pristine credit history get on the property ladder, so speak to a mortgage advisor about your options today.
How long does it take to get a mortgage?
On average, it takes around 18-40 days for your mortgage application to be processed, approved, and issued, although this will depend on how complex your application is, and whether your lender has a backlog of applications to deal with.
In this section, we’ll take you through each stage of the process, including estimates of the time frames for each step, so you can get an idea of how long it takes to get a mortgage.
- Find a mortgage product and consult a broker
How long does it take? 1–2 weeks
First things first: you’ll need to find a mortgage product. A good starting point is to work out how much you can afford to borrow. This will give you a better idea of your budget, and it will mean you don’t put in an offer only to have your mortgage application rejected later on. So, take a look at our mortgage affordability calculator to work out how much you can comfortably afford to borrow.
Once you know how much you’re able to borrow, you can start looking for a good rate. It can be tricky to work out exactly how each rate works out in real terms, so if you need some extra help, try our mortgage finder: this will give you a breakdown of how each one works out in terms of monthly repayments and the total interest payable.
There are hundreds of different mortgage options on the market, but finding one which is right for you can seem overwhelming. So, it’s essential to ask a mortgage broker for guidance. A good broker will review your financial situation, work out how much you can borrow, and then recommend a range of different mortgage products they think will suit your circumstances. This will also cut down the amount of time you need to spend shopping for a product.
The role of the broker doesn’t stop once they’ve found you the right product: they’ll also assist you with all aspects of filling out the mortgage application. They will also help you to understand the final mortgage offer before you sign. If you’d like to get in touch with one of our professional brokers, call us on 033 33 44 33 72 today.
- Get a mortgage in principle
How long does it take? 72 hours
The mortgage in principle is essentially a statement from a lender saying that, assuming the information you’ve provided is accurate and up-to-date, they’ll be happy to give you the agreed loan amount. If you’re careful to provide the correct information (your broker can help with this) you should be able to get a mortgage in principle approved within 72 hours of submitting your application.
When house-hunting, you’re more likely to have an offer accepted if you already have a mortgage agreed in principle. While it’s not a requirement, and it’s not a legally binding guarantee that you’ll get the funds, it can greatly increase your chances of having your offer accepted. It’s very important to remember that a mortgage in principle is not the same as a formal mortgage offer.
- Find your dream property
How long does it take? 3 months or longer
Once you have the mortgage agreed in principle, you’ll have a good idea of your budget and what sort of property you’ll be able to afford. Now, you’re ready to start house-hunting.
Once you’ve found your dream home, you can put an offer in. Having the mortgage promise will increase your chances of being accepted, as the seller can be confident that you stand a good chance of getting the mortgage funds.
- Prepare and submit your mortgage application
How long does it take? 3 hours
Once your offer has been accepted, you can kick start the conveyancing process and submit your mortgage offer. You can speed up this part of the process buy having everything you need to submit with your application ready in advance.
- The lender considers your application and carries out a valuation
How long does it take? 18–40 days
Once your mortgage lender receives your application, their team of underwriters will check your application and the evidence you’ve submitted. Assuming there’s no complications and they’re happy with everything they find, they’ll order a valuation survey to confirm the value of the property on the mortgage. If this confirms the value of the property, then your formal mortgage offer will be sent out to you. This is usually sent within 72 hours of the valuation.
- You’ll exchange contracts and pay your deposit
How long does it take? 2 weeks–3 months, depending on the seller
Once your solicitor has prepared the necessary contracts, you’ll be asked to sign the Transfer Deed. This the legal document in which the seller formally passes ownership of the house over to you. If you have a mortgage broker, they’ll take you through the mortgage offer and make sure you understand the terms and conditions before you sign it. You’ll agree on a date to exchange contracts and decide a final completion date: this will depend on when your seller can move, and if there’s a chain of other buyers and sellers involved.
For the exchange of contracts to happen, you’ll need to send over the deposit. The money needs to be sent to your solicitor’s client account, who will transfer it to the seller’s solicitor on your behalf on exchange day. Make sure you’re prepared for this: your bank may impose a limit on how much money you can send in a single say, so double-check to make sure you’ll be able to transfer the full deposit amount, or you could hold up the exchange.
How long does a mortgage application take?
The mortgage application itself will take around two to three hours to complete, as long as you’ve gathered all the documentation you need ahead of time. It will usually take anywhere from 18–40 days to receive your formal offer, depending on the lender and the complexity of the mortgage. Assuming your application is straight forward and no additional evidence or documentation is required, you can usually expect to have it within three weeks.
What is a mortgage in principle?
A mortgage in principle (often called an agreement or decision in principle) is a statement from a lender in which they agree provide you with a loan based on a provisional assessment of your financial circumstances. It’s based on factors like your income, outgoings, and credit rating.
Once your mortgage in principle has been approved, they’ll issue a ‘mortgage promise’, which confirms that they will offer you a loan, providing that the information is accurate and there are no complications later on. You can then pass this promise on to the seller when you put it an offer. This demonstrates to the seller that you’ll be able to secure the funds for the purchase, which can improve your chances of having your offer accepted.
Does an agreement in principle guarantee a mortgage?
While an agreement in principle means you are more likely to get a mortgage, you should be aware that it’s not a guarantee that you’ll get the funds. At this stage, your mortgage application has only been approved by the lender’s system, not by the underwriting team. They’ll also need to confirm the value of the property by carrying out a valuation. So, just because you’ve the been given a mortgage promise, it doesn’t mean that the lender has locked into the deal.
The formal mortgage application is much more comprehensive, and you’ll need to submit more evidence and supplementation to support your application. The lender will also need to carry out a valuation survey on the property you want to purchase.
The formal mortgage offer cannot be completed until you’ve put an offer on a property. This is because the application can’t be fully approved until they’ve carried out a valuation survey of the property. But, if you already have a mortgage agreed in principle, you’re more likely to be accepted. You’ll also have a more accurate idea of what you can afford to borrow, so you won’t put an offer in only to have your application rejected because you can’t afford it.
What do I need to get a mortgage in principle?
You don’t need quite as many documents to get a mortgage in principle as you will to get a formal mortgage offer. However, you’ll need to provide at least the following:
- Proof of ID
- Proof of address for the past three years
- Proof of your income
Some lenders may ask for proof of your spending, and proof that you have a deposit saved.
How long does a mortgage in principle last?
The typical mortgage in principle lasts for 60–90 days, depending on the lender. This gives you a window of time to go house hunting.
Remember, it’s always possible that your circumstances could change during this period. For example, if you were to miss a repayment or bill, or anything else that might affect your credit rating, then you could be rejected when you come to apply. So, think of the mortgage in principle as a conditional offer, not a guarantee.
Once the mortgage promise expires, you’ll be able to reapply for another. Remember, if any of your financial circumstances have changed, you’ll need to update your details when you apply, as it could affect your chances of being accepted later on if they are inaccurate.
What do they look for in a mortgage valuation survey?
The purpose of a mortgage valuation survey is to establish the true value of the property. The loan is secured against the value of the property, so the lender needs to confirm that it’s actually worth the amount of money they’re giving to you. This is why they’ll get an independent opinion on the true market value of your chosen home.
During a mortgage valuation a lender will also check for characteristics or defects that might affect the value. The surveyor will visit the premises and make a brief report on the following:
- The condition of the property.
- Any modernisation work that has been carried out on the property prior to putting it up for sale.
- Whether or not the property is in a location that may be vulnerable to flooding or is extremely dilapidated.
The estimated value is then compared with the values of three other properties in the surrounding area, in order to help the lender establish whether your property has been overpriced. The valuation will only take about 20–30 minutes to carry out, depending on the size of the property.
The important thing to remember about the mortgage valuation is that it is not a survey in the strictest sense, and the purpose of it is to protect the lender’s stake in your home, not to protect your interests. They only go into superficial depth, and they’re unlikely to flag any structural issues or faults that may need expensive repairs after you move in. So, for complete peace of mind, it’s still sensible to pay for a private survey before you commit.
What can you do is the property is down valued?
If the survey reveals that the sale price is higher than the property value, then the property is ‘down valued’. This can be especially common in areas where the property market is inflating fast, lenders will often analyse the value of properties in the area using data from previous sales. If this happens, then the mortgage provider may ask you to pay a bigger deposit, or you might need to go back to the seller and try to negotiate a lower asking price.
How long after the valuation will I get a mortgage offer?
Exactly how long you’ll have to wait between the valuation and mortgage offer will depend on your lender, but in most cases, it will take around five days for your bank or building society to receive and process the report. If the report confirms the value of the property, then they will continue with your application and you should receive a formal mortgage offer within 48 hours.
How long is a mortgage offer valid for?
A formal mortgage offer is usually valid for around 3–6 months, which is normally enough time for the conveyancing process take place. Remember, your formal mortgage offer is only valid for the property for which it is named. So, if your purchase falls through, you’ll need to apply for a new mortgage when you find another property.
Now that you know how to get a mortgage, you’re one step close to owning your first home. Remember, our expert team can help you to find the right mortgage product to suit your circumstances, and we’ll be right by your side to guide you through every step of the application process. So, whether you’re looking for a first-time buyer mortgage, an adverse credit mortgage, or a Help-to-Buy mortgage, our team can help. For more help and advice, take a look at our guides section, where you’ll find wealth of expertise on all things mortgages.