At The Mortgage Hut, of course, we are old hands and have helped tens of thousands of people to get a mortgage, so why not let us be there to make your dreams of a home come true?
In making sure you get the best mortgage deal available, the ‘when’ of applying is often as important as the ‘how’. Many factors will affect the chances of your success, so it makes sense to take a step back and properly plan your mortgage application to maximise those positive factors and deal with any negative issues.
Step One: Understanding when to apply for a mortgage
1.1 - Calculating your buying power
How much mortgage can I get? It’s probably the number one question we get asked, and for good reason - understanding your buying power is key to starting your mortgage application process.
The greatest factor is your income, or combined income when looking at a joint mortgage. Most lenders have a rule of thumb that means they will lend up to four times (4x) the income presented, so if you earn £25,000 p.a. and your partner earns £31,000, your basic mortgage tops out at £224,000 (£56,000 x 4).
Some lenders are willing to look at 4.5x, 5x and even (in specialised circumstances) 6x mortgages. Use our mortgage calculator to get a good idea of your buying power and to see how we can help.
Other factors, such as your deposit and credit score, will have an impact on your final buying power calculation, but using your income as a guideline will get you on the path!
1.2 - Raising your depositSaving for a deposit can take years and will strongly affect the timing of your end mortgage application.
Lenders calculate required deposit based on the loan-to-value (LTV) of the mortgage. LTV is the measure of the size of the mortgage against the market value of the property. A mortgage of £160,000 against a home worth £200,000 has 80% LTV, for example, where a mortgage of £150,000 against the same property would be 75% LTV.
When buying a new house, anything not covered by the mortgage needs to be paid for with your deposit, so with a 80% LTV mortgage, your deposit would need to be 20% of the property value.
Most first-time buyers will be expected to raise between 10% and 15% for a deposit (90% to 85% LTV mortgages). Some lenders will offer mortgages as high as 95% LTV, making deposit saving a lot easier.
Taking a little more time to improve your deposit can make a huge difference on the final mortgage deal you obtain. Saving isn’t the only route to a good deposit and strong bargaining position for your mortgage, however - read our First-Time Buyers Guide and Gifted Deposits article for more helpful advice!
1.3 - Polishing your credit scoreYour credit history has a large part to play in your mortgage application, and from the very beginning you should have a good understanding of your credit report. In the UK, mortgage lenders use one of the three credit reference agencies (CRAs) - Experian, Equifax and TransUnion.
Data regulations mean you can check your own rating for free on their websites, and we recommend you do this regularly in the run up to applying for a mortgage.
If you credit score is low, then you may need to raise a larger deposit (15% or even higher) as you will only be offered lower LTV mortgages as part of the lender’s risk assessment.
We have lots of advice on how to improve your credit score if it’s a problem, as well as a dedicated bad credit mortgage team who can help with routes to specialised lending. Read our articles on the subject here.
1.4 - Accounting for external factorsThere are many other external factors that can cause you to adjust your timing for your mortgage application, from the right house entering the market making you want to jump a little earlier than planned, to politics around Brexit giving you cause to hold back until things are more settled.
Of course, at The Mortgage Hut, our teams keep themselves up to date with the latest happenings in the world of mortgages and everything that affects the deals available. Feel free to call and discuss the current climate for mortgage deals!
Step Two: The shopping stageThe excitement ramps up when you reach the shopping stage! Looking at properties, finding something that suits you and putting in an offer - these are all heady moments! Look to The Mortgage Hut to support you throughout.
2.1 - Contact The Mortgage HutOnce you have made the decision to look for a property, it is good to get your mortgage advisor on board immediately! We can help you avoid any pitfalls along the way, as well as smoothing the whole application process to make it easier for you.
Buying a house is a big decision, so having someone experienced on your side is essential.
2.2 - Obtaining a decision in principleA decision in principle (also called an ‘agreement in principle’ or ‘mortgage in principle’ and abbreviated to DiP, AiP and MiP accordingly), is a soft agreement from the mortgage lender to provide the mortgage.
Buying a house can sometimes feel like a chicken-and-egg problem - you need the money to look at properties with confidence and put in an offer, but you can’t get a mortgage without knowing the house you intend to buy.
A DiP solves this quandary by providing an early agreement to the mortgage without going through the in-depth process of an application. It involves a credit check which doesn’t affect your credit history going forward and can be completed quickly.
It is important to understand that a DiP is not a firm mortgage agreement. It is based off a simple credit check and other early information, and doesn’t have the level of due diligence that the lender will go through to make a final decision.
Typically, it is a good indicator and statement of intent, and assuming nothing is hidden that will turn up later and that circumstances don’t change, a DiP will turn into a successful mortgage application at a later date.
We can get a decision in principle for you often in a single working day! Just give us a call or fill in our contact form with your details.
Once you have the DiP, you can go confidently to estate agents and view properties within your budget.
2.3 - Finding a new homeArmed with your decision in principle, you are able to view properties and make an offer once your find the one that is right for you.
Once your offer is accepted, you will need to apply fully for your mortgage.
Step Three : How to apply for a mortgageThe final stage is the main mortgage application itself. With all the preparation done and with help from The Mortgage Hut, this otherwise-nerve-wracking process is made simple.
Your mortgage broker is now your best friend! Let us know that you’ve made an offer on a property and we will begin the paperwork needed for a complete mortgage application.
3.1 - Contact The Mortgage Hut
At this stage, you will be looking to turn your decision in principle to a full mortgage and the lender will need to perform a full credit and background check on you to assess risk and suitability.
Remember, the DiP was only a preliminary check and did not guarantee a mortgage.
You will need to supply:
- Full photographic identification documents
- Proof of your deposit
- Bank statements for the last three months
- Proof of income if employed (P60 and three months’ payslips)
- Accounts if self-employed
- Documentation for any benefits you are paid
- Proof of any other income (maintenance payments, sales bonuses etc.)
- Utility bills for your current home
We will then help you with your application to pass to the mortgage lender - you can leave everything with us to handle from here!
3.2 - The property valuationYour mortgage lender will need to make an independent valuation of the property. This is to check that the property value is enough to support the mortgage being secured upon in. Remember, that if you fail to make repayments on your mortgage, your house is at risk of being repossessed and sold to repay the debt.
The mortgage provider needs to know that in a repossession situation, they would be adequately recompensed.
The result of the property valuation may affect the LTV of your final mortgage.
3.3 - Mortgage agreed!If everything goes the right way, your mortgage will be agreed and you can move to the next stage of buying your property - this involves instructing a conveyancing solicitor to prepare the contracts and having a survey completed on the property before final completion when you get the keys!
Should any problems occur at this stage, then we are here to help. Our team at The Mortgage Hut will step in without delay to discuss with you whatever issues have arisen.
Remember, with a wide range of specialist lenders available to us, we can work swiftly to renegotiate your mortgage needs with a replacement provider should your first application be rejected, as well as look over the situation with you and help plan to resolve any problems as easily as possible.
The mortgage application process FAQsHow long does a mortgage application take?
The average length of a mortgage application in the UK is six weeks once the paperwork has been submitted to the lender.
Is the mortgage application different for first-time buyers?
First-time buyers have access to some government-based schemes and other advantages that can help them get on the property ladder and involve an extra layer to the application, but the overall impact on the application process is low.
Read our comprehensive guide to buying your first home for more information.
Why use a mortgage broker?
Visiting a single building society, high street bank or other mortgage lender means being restricted to the deals provided by that lender. At The Mortgage Hut we have a relationship with almost 100 different mortgage providers and when we work with you to get your mortgage, we are able to consider the best solution from thousands of mortgage products and deals.
By using a mortgage advice and broker service like The Mortgage Hut, you get access to that huge market of mortgage providers and products as well as the help from expert mortgage advisers with decades of experience in successful mortgage applications.
Simply put, through The Mortgage Hut, you’ll get a better deal, a higher chance of a successful application and a simplified process!
At The Mortgage Hut we can get you a decision in principle without delay, so if you have already seen that perfect home it’s not too late!
Applying for a mortgage with The Mortgage Hut
Our expert teams will see your mortgage through from your first queries through to unlocking the door for the first time on the final day. We make the application process a smooth, stress free experience so that you can enjoy buying a new home without worry.
To find out more, fill in our contact form and one of our team will get back to you at a convenient time, or pick up the phone and call today!