How to apply for a mortgage

If you’re thinking about buying a home, applying for the mortgage can seem like a daunting task. You will need to provide lots of information and fill in loads of forms, but being prepared will help the process move as smoothly as possible. 

How do lenders check I can afford a mortgage?

Lenders will work out your household income – including your basic salary and any other income you receive from a second job, freelancing, benefits, commission or bonuses.

Checking affordability is a much more detailed process. Lenders take all your regular household bills and spending into account, along with any debts such as loans and credit cards, to make sure you have enough left to cover the monthly mortgage repayments.

They also have to ‘stress test’ whether you could still afford the mortgage repayments if interest rates were to rise, or if you were to retire, go on maternity leave or have a child.

In addition, they’ll make a credit check with a credit reference agency once you make a formal application to take a look at your financial history and assess how much of a risk lending to you might be.

How to prepare for your application

Before applying for a mortgage, contact the three main credit reference agencies and look at your credit reports. Make sure there is no incorrect information about you. You can do this online either through a paid subscription service or one of the free online services currently available.

You can check you credit score with one of the three main credit ratings agencies:

What you need to apply for a mortgage

Start collecting all the documents you’ll need for the mortgage application process. This might include:

  • utility bills
  • proof of benefits received
  • P60 form from your employer
  • your last three months’ payslips
  • passport or driving licence (to prove your identity)
  • bank statements of your current account for the last three to six months
  • statement of two to three years’ accounts from an accountant if self-employed
  • tax return form SA302 if you have earnings from more than one source or are self-employed
  • self-employed people should look to provide information alongside their tax return, which supports what the SA302 says about their income, such as bank statements.

Be accurate. Make sure the information on the application form matches the documents you give them.

For example, don’t round up your salary if the amount on the payslips differ from this figure.

Provide details of the address of the property you want to buy, the estate agent and your solicitor.

These are the basics – some lenders might ask for more paperwork.

Bear in mind lenders might have different criteria around income and outgoings.

Ask your lender or independent mortgage adviser what else you might need.

Please note, printouts of online statements of your current account and utility bills might not be acceptable.

You will either need hard copies or to have copies certified by your solicitor, your bank or your utility provider.

How you spend your money

You might also need to show your outgoings, including how much you’re borrowing on credit cards and other loans.

As well as your household bills, including:

  • utility bills
  • Council Tax
  • insurance policies, and
  • general living costs such as travel, childcare and entertainment.

Are you remortgaging?

If you want to increase the size of your mortgage you might also have to go through the affordability checks above, and you’ll be given advice around which mortgage products are suitable.

If you have a mortgage and don’t want to borrow any additional money, there are more flexible arrangements.

Do you want an interest-only mortgage?

Not all lenders offer interest-only mortgages.

If you do apply for one, you will have to show you have a credible repayment method in place, as well as meeting the necessary income criteria.

Speak to a mortgage adviser

With so many options available, choosing the right mortgage can be very difficult. A mortgage advisor can help you find the right mortgage for you.

Calculate the total cost of your mortgage

The lender or the broker will do this for you, but make sure they explain all the charges and fees, including any conditional charges and fees, such as early repayment penalties.

Some brokers will charge a fee for advice, receive a commission from the lender or a combination of both. They will tell you about their fees and the type of service they can provide at your initial meeting. In-house bank and building society advisers don’t normally charge a fee for their advice.

You will be shown the total yearly cost of a mortgage expressed as a percentage of the loan. This will be shown as an Annual Percentage Rate of Charge (APRC) calculation and includes any fees such as valuation or redemption fees associated with your mortgage. This APRC will help provide a more thorough comparison between the different mortgages deals available.

Getting a mortgage is about more than just the monthly payments. You also need to budget for the other costs such as solicitor fees and Stamp Duty.

Using price comparison websites

Comparison websites are a good starting point to see the prices that are out there and for trying to find a mortgage that suits you.

Popular websites for comparing mortgages, include:

Remember:

  • comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • it's also important to do some research into the type of product and features you need before making a purchase or changing supplier.
  • find out more in our guide to comparison sites.
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Whatever your circumstances or plans, move forward with MoneyHelper.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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