How to get a mortgage, by Matt Stevens
If you’re a first-time buyer, you’ll already be aware that climbing onto the first rung of the property ladder isn’t easy. Increasing property prices mean that the average house deposit is rising, and your provider will have all sorts of stringent mortgage requirements you’ll need to satisfy before they’ll agree to give you a loan. The process of applying for a mortgage can also be lengthy and confusing, so you’re likely to have a lot of questions at every stage.
To make your life easier and help you make sense of it all, we’ve put together this guide, which will explain exactly how to get a mortgage. We’ll talk you through the steps and outline how you can ensure you satisfy your lender’s eligibility criteria. Here, we’ll cover:
- What do you need to get a mortgage?
- How long does it take to get a mortgage?
- What do they look for in a mortgage valuation survey?
- How much do I need to earn to get a mortgage?
- How long does a mortgage offer last?
- What stops you from getting a mortgage?
Let’s jump into it so you can get started on your mortgage application as soon as possible.
What do you need to get a mortgage?
To get a mortgage, you’ll need:
- A mortgage deposit
- Proof of your identity and income
- A fair credit rating
Mortgage lenders want to be very confident that you’ll be able to afford your monthly repayments, which is why they have such strict lending eligibility criteria. You’ll often need to borrow tens or even hundreds of thousands of pounds from your chosen provider, so it’s only natural that they will want to carefully assess your situation to protect themselves.
Here, we’ll go into more depth about what you’ll need before beginning your application, so you can ensure you’re prepared.
A mortgage deposit
For many first-time buyers, saving enough money for a mortgage deposit is one of the toughest parts of purchasing a property. House prices have typically been rising year on year, which means the average house deposit has also increased. Plus, you need to remember that having a larger deposit will give you access to better mortgage interest rates. As a result, it can pay to be patient.
You will pay your deposit as a lump sum upfront, so you will own a portion of your property outright from the beginning. This also lessens the risk for both you and the lender, as it means you won’t be in negative equity if the value of your home does fall during your mortgage term.
Lenders will typically require you to pay 10% of your property’s value as a deposit, although there are a number of Help to Buy schemes that have been designed to help you save faster or reduce the amount you need to pay upfront. Check out our Help to Buy guide for more information about what support is available to you.
It’s also important to bear in mind that it’s not just a matter of saving up the cash — due to the relevant 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.
According to research by Lloyds Banking Group, in 2020 the average first-time buyer’s deposit was £57,278. This was a 23% increase on 2019’s average house deposit of £46,449. Although it is worth noting that this is a bigger jump than we would typically see, no doubt influenced by the coronavirus pandemic.
If you’re hoping to buy in London, the average first-time buyer deposit in 2020 was £130,357, up from £110,145 in 2019.
Proof of your identity and income
Your mortgage lender will require evidence of your identity and other basic details, as well as confirmation of your financial situation and income. So, ahead of filling out your application, you’ll need to have these documents on 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 and trying to get a mortgage, you’ll need to provide the following documents:
- A statement of 2–3 years of 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 to get an idea of your history of handling debt.
While your rating will certainly have an impact on your application, don’t assume that you’ll never get a mortgage if 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.
What credit score do I need for a mortgage?
There’s no magic number when it comes to what credit score you need 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. 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.
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.
Here, we’ll take you through each stage of the process and provide you with estimates of the time frames for each step, so you can get an idea of how long it takes to get a mortgage.
1.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 ourmortgage 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, read our guide to mortgage interest rates, which outlines everything you need to keep in mind.
There are hundreds of different mortgage options on the market, but finding the one that’s 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, either — they’ll also assist you with all aspects of filling out the mortgage application and 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.
2.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.
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 to 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 in 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.
How to get a mortgage in principle
The process of getting a mortgage in principle is typically relatively simple. You’ll usually just need to provide your mortgage broker or lender with a few key pieces of information, such as your personal details, income, and monthly expenses.
You won’t need to provide evidence of the information at this stage, but the documentation will be required if you then make a formal application.
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 been given a mortgage promise, it doesn’t mean that the lender is 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 in 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 also 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, 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.
3.Find your dream property
How long does it take? 3 months or more
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’ll be ready to start house-hunting.
Once you’ve found your dream home, you can put an offer in. Having a mortgage in principle will increase your chances of being accepted, as the seller can be confident that you stand a good chance of getting the mortgage funds.
4.Prepare and submit your mortgage application
How long does it take? 3 hours
Once your offer has been accepted, you can begin the conveyancing and mortgage application process. You can speed up this part of the process by having everything you need to submit with your application ready in advance.
5.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 are 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, your formal mortgage offer will be sent out to you. This is usually sent within 72 hours of the valuation.
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 straightforward and no additional evidence or documentation is required, you can usually expect to have it within three weeks.
6.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 is 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 whether 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 the client account of your solicitor, who will transfer it to the seller’s solicitor on your behalf on exchange day. Make sure you’re prepared for this, as your bank may impose a limit on how much money you can send in a single day. So, double-check to make sure you’ll be able to transfer the full deposit amount, or you could hold up the exchange.
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 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 if the property is down valued?
If the survey reveals that the sale price is higher than the property value, the property will be ‘down valued’. This can be especially common in areas where the property market is inflating fast, as lenders will often analyse the value of properties in the area using data from previous sales. If this happens, 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, they will continue with your application and you should receive a formal mortgage offer within 48 hours.
How much do I need to earn to get a mortgage?
When it comes to how much you need to earn to get a mortgage, there’s no one-size-fits-all answer. There are lots of other factors that will come into play, such as how big your deposit is, what your outgoings look like, how much you want to borrow, and whether you’re buying on your own.
At The Mortgage Genie, we have a mortgage calculator that will help you to get an idea of how much you may be eligible to borrow based on your income. This will help you to understand how much you can afford to borrow and what kinds of properties you should be considering.
How long does a mortgage offer last?
A formal mortgage offer is usually valid for around 3–6 months, which is normally enough time for the conveyancing process to 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.
What happens after a mortgage offer is issued?
Once you receive a mortgage offer, you will need to accept or reject it. If you’re happy with the offer, you’ll need to accept and sign it to move forward. This can usually be done online. On the other hand, if you’re not quite happy with the deal you’re offered, you’ll need to search for another one.
If all is well, once everything is signed, your solicitor or conveyancer will begin the final phase of your purchase, where you’ll agree on a date to exchange contracts with the property seller. This is when you’ll legally commit to going through with buying the property. At this point, you need to ensure you have your deposit as well as the money you’ll need to cover any other relevant mortgage fees and charges.
The final step is to complete the purchase, and the property will be yours.
What stops you from getting a mortgage?
To ensure they completely understand your situation and feel confident that you can afford the repayments on your mortgage, your lender will carefully analyse everything from your current income to your monthly outgoings. There are some high-risk factors that can deter providers from accepting your application, and these include if:
- They deem your income to be too low
- You have a bad credit rating
- You aren’t on the electoral roll and therefore can’t prove your current address
- You haven’t given proof of having a consistent income (this is particularly important if you’re self-employed)
- You’ve made mistakes on your application form
- You’ve applied for the wrong type of mortgage deal and you aren’t eligible
- You’ve made too many recent credit applications
Speaking to a mortgage broker ahead of applying for a mortgage can help you to ensure that you have everything in order and are in a good position to take out a home loan. This can save you time and will give you the best possible chance of being accepted.
We hope you now feel like you have a much better understanding of how to get a mortgage and how long the whole process typically takes.
If you would like any help with finding the best mortgage deal and submitting your application, our team of expert mortgage brokers is here to support you. So, get in touch with us today, and feel free to also check out some of our other mortgage guides for more helpful advice.