Buying a new home is an exciting event, but it can also be a stressful experience. This is especially true when it comes to securing the best mortgage deal. A mortgage is a significant commitment, so getting the right product that matches your circumstances can feel particularly overwhelming.
Understanding how the mortgage process works and preparing in advance for each of the steps involved is really important. It’ll go along way to smoothing the home-buying process and getting you into your dream home.
The important thing is not to panic! Edward Mellor are experts in helping home buyers find the right mortgage deal to fit their circumstances. We’ve created this useful guide to understanding the mortgage application process and what you’ll need to do to secure your loan.
If you’d like to speak to someone about a mortgage application right away, feel free to contact us or call one of our advisors on 0161 44 4830 – we’d love speak with you.
There are several steps involved in applying for a mortgage and few things to consider before you get started.
Planning ahead is key, so make sure that you take the time to understand the various mortgage types available, how much you are likely to be able to borrow and the type of property you want to buy. Once you feel ready to go, it’s time to find a mortgage and begin the application process.
• Find a mortgage – The first step in the mortgage application process is finding a suitable mortgage product. You’ll need to think about the type of mortgage that works best for you and how long you want the deal to last. A mortgage broker can help a lot here, as they can compare thousands of products from hundreds of lenders.
• Get your documents together – You’ll need provide lenders with proof of identity; proof of address; bank statements for the last three to six months; and proof of employment, so getting these documents ready ahead of time will help process run smoothly.
• Get an agreement in principle – An agreement in principle (AIP) indicates how much a lender would be willing to allow you to borrow.
• Make a formal mortgage application – Once you made an offer on a property that has been accepted, it’s time to make a formal mortgage application. This is more involved than applying for an agreement in principle, as the lender will run more stringent checks. Your mortgage broker can arrange this for you, as it is an involved process.
• Formal Offer – If everything is in order, you should receive a formal mortgage offer and can prepare to exchange contracts and complete your purchase.
If you’re thinking about moving home or buying a new property, it’s important to start thinking about your new mortgage as soon as possible. Getting your mortgage process moving early on with an agreement in principle will get your journey into a new home off to a flying start!
Once a lender has your AIP on record, it is relatively easy for you to apply for your mortgage. As soon as you’ve found a property you want to buy and had an offer accepted, you can contact your lender and begin the mortgage application process in earnest.
The amount that you are able to borrow on your mortgage will depend on a number of factors, including your income, debts and the type of home you want to buy. The best way to find out much you could borrow on a mortgage is by securing an agreement in principle.
An agreement in principle is an indication of what a lender would potently be willing to let you borrow, depending on your current circumstances. You’ll often see AIPs referred to as offers in principle, mortgages in principle or decisions in principal, but these all refer to the same type of arrangement.
An agreement in principle is not the same as a full mortgage offer, as the agreement will need to be checked against more stringent credit checks, but having an AIP in place will indicate that you are serious about buying and help you get a realistic expectation of how much you can borrow.
Typically, you will not need to pay for an agreement in principle and they do not lock you into a contract with the lender. This is worth remembering, as you could secure several AIPs with different lenders to help you find the best deal.
After you’ve submitted your formal mortgage application, your lender will conduct more rigorous financial checks before agreeing to the deal. At the same time, an underwriter will verify the information that you have provided. This process can vary in duration depending on which lender you have chosen.
Your lender will also make sure that a property valuation is carried out to check that the home you are buying is priced correctly against the amount you want to borrow.
Although the time it takes to process a mortgage application can vary, on average customers will receive a decision in 4-6 weeks. It’s worth keeping in mind that more complicated mortgage applications may take a little longer to process.
If you are buying a non-standard build, or you have bad credit for example, the application process may be delayed by a number of weeks.
The amount of time that a mortgage offer lasts can vary from lender to lender, but mortgage offers are typically valid for 3-6 months.
It’s important to make sure that you understand the terms of your mortgage deal before you sign it. This is especially true if you’re buying a new build property, as some lenders can even specify a date on which you must have completed.
You may need to ensure that your mortgage offer is valid in line with the building’s construction completion date, with some additional leeway to account for any unexpected delays.
Working with a mortgage broker can be particularly helpful here, as they will keep you updated on the process of your application and can communicate with lenders if you need to seek a mortgage extension.
If your mortgage application is declined it is really important hold to fire and find out what went wrong. Repeating the same process with another lender right away risks having a second mortgage application refused. This can begin to have a negative impact on your credit score.
The first thing to do if your mortgage application is refused is to speak to your lender to find out why. Then try to improve your situation before applying to another lender.
It’s not common, but it is possible for a mortgage offer to be withdrawn after you have signed it. A mortgage offer could be withdrawn because:
• The mortgage offer expires – this is the most common cause for a mortgage to be withdrawn.
• Change in financial circumstances – like losing your job or becoming too ill to work.
• Property issues – If your mortgage provider decides to do further surveys on the property, they may find problems such as structural issues that could be a risk to their investment and decide to withdraw the offer.
• Receiving false information – If a lender finds that they have received false information, it is very likely that they will withdraw a mortgage offer. The same will apply if your bank accounts are flagged as being involved in any suspicious activity.
• Changes in property and market values – a shift in interest rates or a change to property values could cause lenders to reassess the monthly payments on new mortgages. This can lead to them deciding to withdraw mortgage offers.
If your mortgage offer is declined, it is again best to your lender to find out why before leaping ahead and applying for new deals.
Once you receive your mortgage offer it is important that you take the time to read through everything thoroughly to ensure that you are happy with your mortgage deal and that you accept the terms and conditions.
A mortgage is a significant decision and it’s better to refuse a mortgage offer than to be locked into a deal that isn’t suitable, or that risks problems later on.
When you are ready to accept a mortgage offer, it’s time to instruct a solicitor to undertake the conveyancing process on your behalf. This is the point at which you’ll be expected to pay a deposit on the property and prepare to exchange contracts, so you’ll need to make sure that the funds you intend to use to pay your deposit are available.
Once contracts are exchanged the agreement to buy or sell a property is considered to be legally binding and your new home will be yours, which means the next step is getting ready to move – exciting times!
If you’d like to speak to someone about the mortgage application process or finding broker to guide you through buying a property, contact us or call one of our advisors on 0161 44 4830 – with over thirty Years of experience, Edward Mellor are committed to proving an unrivalled customer experience.
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