4 Steps to Getting a Mortgage
There are a number of important steps in the mortgage process which Brindle Financial Services can negotiate you through. Although there are numerous stages, we have distilled this into four easy steps to make life easy.
How Much Can I Borrow
This step is absolutely fundamental and an obvious starting point. Lenders use different affordability calculators and will take different additional factors into account. For example, one lender may allow a certain level of overtime which differs from another. Some lenders may take bonus income into account where another will not. Lenders will have differing minimum salary thresholds which in some cases could automatically exclude you or mean you will require a larger deposit to get the property you want. Often what happens in practice is, a person will decide to go their bank where their current account is and apply for a mortgage, the bank will apply their specific criteria which may impact on what can be borrowed and ultimately where you will live. Therefore, it is very beneficial to use a broker to assess a number of lenders at the same time, with the view of getting a mortgage for you in line with your affordability and your deposit. The important thing is to be comfortable with your level of borrowings and your monthly repayments. We can help you understand what a lender is likely to lend you and what you can buy in line with your deposit.
Obtaining Approval in Principle
Obtaining approval in principle is first formal step to obtaining a mortgage, although the lender will often confirm you have approval in principle and may even put this in writing, it is not binding on the lender. However, it is probably one of the most significant steps to getting on your way.
Obtaining approval in principle involves providing underwriting documents to the lender. For example, bank statements, loan statements, payslips, P6O’s, business trading accounts (if self-employed) and other relevant documents depending on your personal circumstances. From 2008 the requirements to obtain a mortgage have become more stringent and lenders generally follow set criteria strictly.
It is important to get this step right and present the information in structured and coherent manner, your broker can be of great assistance in this regard as issues can be remedied and specialised advice given if and when required.
Once everything is in order, your broker will present your application to the lender and seek approval in principle. This is very important, on obtaining approval in principle you should start looking for a property. In fact, when you call an auctioneer and enquire about a property they have listed, they will generally ask you have you obtained approval in principle and seek proof of funds verifying your deposit.
Obtaining a Loan Offer
Now that you have approval in principle you can seek out a property in line with the suggested loan amount and your deposit. Lenders generally like transactions to be at arms-length to ensure the purchase price has been properly arrived at and the property is purchased for current market value, this is not an absolute rule but certainly a rule of thumb.
Often you will find yourself bidding against other potential purchasers which can increase the price over and above what you might like to pay for the property. Once a purchase price has been agreed, the bank will require a valuation from a suitably qualified property agent.
Some valuations will recommend a structural survey is sought from a suitably qualified surveyor or engineer to ensure there are no defects structural or otherwise. If a survey is recommended, lenders will generally insist on this. However, it is good practice to obtain one regardless of this being recommended or insisted upon by the valuer.
Once the valuation and survey (if applicable) are obtained, and if in order, the lender will generally issue the loan offer and loan pack to your solicitor. It is important prior to loan offer issue you fully understand the type of mortgage product which is best suited to you. Most lenders will have a suite of mortgage products and this can often be the hardest decision. For example, it can be difficult to understand what underpins interest rate movements, is a variable or fixed rate mortgage better for me, what is the best rate I can get with the level of deposit I can have. These are crucial decisions and often require discussion and advice from your broker. So don’t waste the opportunity, ask your broker every question you can think of and ensure you are satisfied before you decide on your best option.
Mortgage Issue and Closing the Sale
The loan offer will have conditions which you must satisfy for the mortgage funds to be provided to your solicitor to close the sale. Some of the conditions will be satisfied by your solicitor, for example, certifying that the title is in order for you to complete the purchase. The lender will require a lien on the property as security for the mortgage they give you.
There are matters for you to comply with on the mortgage too, for example, you will generally be required to have a life policy with the lenders interest noted on the policy. This is to repay the mortgage in the event of your untimely death. There is also a requirement to insure the property with buildings cover for a specified amount.
You will be required to attend your solicitors to go through the loan documentation and execute the legal documents. At this meeting you will generally sign the contracts of sale for your chosen property. These final stages often involve your broker and solicitor working close together to make the process as seamless as possible for you.
Once all the relevant documents are executed and your insurances are in place you can close the sale. You can close the sale on any day but Friday’s can be good if you are superstitious!
Getting a mortgage can involve multiple choices along the way. We can provide advice and refer you to solicitors, auctioneers, surveyors and other professionals if and when required to make your purchase as seamless as possible.