Every year, thousands of Britons go cap-in-hand to banks and other lenders to request the money to buy a home. From first time buyers to re-mortgages, buy-to-let investors to re-locators, getting that all important ‘yes’ from lenders can be a tough call.
This year’s mortgage acceptance rate was up, at around two thirds of applications being accepted, compared to just one in ten in 2010. Although the acceptance rate is improving as we move further away from the crash of 2008, borrowers still have a tough task on their hands if they’re going to secure a great mortgage at a great rate.
Being prepared for your meeting with your lender is the first step to getting an offer. Understanding what you need to bring along, what sort of questions they’ll be asking and what kind of evidence you’ll need to provide will stand you in good stead for a positive outcome to the meeting.
There are several pieces of paperwork you’ll need to have to hand at some point during the application process. Here’s what you’re going to be asked for:
- Proof of identity and address: You’ll need to prove that you are who you say you are, and that you live where you’ve said you do. This means you’ll need a proof of identity, such as a passport, photo driving licence or shotgun license. You’ll also need a proof of address, such as a mortgage statement, council tax bill, bank statement or utility bill.
- Proof of income: Each lender has their own set of requirements for proving your income, and it can be more difficult if you’re self-employed. In general, if you can lay your hands on three months of payslips and the last two years’ P60’s you’ll be well prepared. For those self-employed, bring along your accounts and SA302 tax calculations for three years and the corresponding tax year overviews. All available from HMRC website, speak to your accountant or mortgage broker for help.
- Proof of affordability: Your lender will be checking to see if you are able to afford the repayments you are agreeing to. For this reason, you should bring along any evidence of benefits, savings and investments coming in, as well as any credit commitments you have going out.
- Bank statements: Bring along the last three months of bank statements (at least) to show responsible income and outgoings for the month.
- Insurance policies: If you have existing life insurance, critical illness or income protection insurance, you should bring along evidence of this. It could work in your favour if your acceptance is touch-and-go with the lender.
It might seem like you’re being asked to pull together a PhD thesis just to apply for a mortgage, but take it one step at a time and it’s not that bad. The more you can gather before you even start applying for mortgages, the faster things will move and the easier it will become. Grab a folder and organise your life admin to ensure an easier ride.
Most lenders these days are asking for a minimum 10 per cent deposit, and many are looking for 20 per cent and up. Whatever amount you’ve managed to save, you’ll need to prove to your lender that the money is yours before they’ll consider you for a mortgage. If it’s in an investment account or a bank account, you’ll need to bring along a statement. If it’s a gift from a relative or friend, get them to sign a letter saying they are holding the deposit for you.
Your lender will run a credit check to make sure you are suitable for their loan criteria. There’s not much you can do about this if you do have black marks from the past, but do think about improving your credit score prior to applying for a mortgage to make it more likely that you’ll be accepted. Pay off what you can, check you’re on the electoral role and grab a copy of your credit report to make sure everything on there is correct.
Even after all that, you’re still not guaranteed acceptance on a mortgage. However, if you’ve taken the time to gather the paperwork and evidence needed, you’ll be ready to apply with another lender.
To save time and increase your chances of getting a mortgage offer, consider using the services of a mortgage broker. This way you’ll only need to provide your information once, they will also be able to advise you on what documentation can improve your chances, and have access to mortgage products that you may not have seen online or at your local bank or building society.
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