Preparing For Your Mortgage Application.

If you’re considering applying for a mortgage this year, it’s vital to recognize that mortgages represent one of the most significant financial transactions in most people’s lives. Purchasing a property can be a complex and time-consuming endeavour.

Today, securing a mortgage isn’t merely about accepting a lender’s offer; it’s about finding and selecting the most suitable mortgage for your needs.

To prepare yourself for the mortgage application process in 2024 and increase your chances of securing favourable loan terms.

What To Do Before Applying For mortgage

Seek Expert Guidance: Financial Adviser or Mortgage Broker

Begin by finding a reputable advisor or mortgage broker who can offer tailored guidance. A qualified professional can provide invaluable insights and assistance throughout the mortgage application process. You can explore the following options to get an advisor.

Bank Consultation: Initiate a conversation with your bank, as they often provide mortgage advisory services.

Online Research: Utilize search engines such as Google, bing, etc to discover accredited advisors in your area.

Financial Advisor Directories: Browse platforms like Vouchedfor or similar websites to access verified professionals.

Personal Referrals: Don’t overlook the power of personal connections; inquire with friends and family for recommendations of trusted advisors.

The Rock FMC, we are also qualified financial advisors ready to assist you in navigating this important financial decision.

Get Pre-Approved

Your adviser will be able to help you get pre-approved for a mortgage before house hunting. Pre-approval involves submitting a mortgage application and without providing evidence of financial documentation to a lender. Once approved, you’ll receive a pre-approval letter known as (Decision in Principle-DIP / Agreement in Principle-AIP) indicating the loan amount you qualify for. This can strengthen your chances of your offer being accepted, when competing with other buyers and indicate to sellers your readiness to purchase.

Check Your Credit Score

  • Obtaining a copy of your credit report from major credit bureaus is very vital and review it for errors or discrepancies that could impact your credit score.
  • Regularly monitoring your credit report and promptly addressing any inaccuracies is crucial.
  • Take proactive steps to improve your credit score, such as paying bills on time, reducing outstanding debts, and avoiding new credit inquiries. 

Manage Your Debt:

Lenders consider debt-to-income ratio when assessing mortgage application. Aim to pay down outstanding debts and avoid taking on new ones before applying for a mortgage. This can demonstrate your financial responsibility and improve your eligibility for a loan.

Having a Down Payment (Deposit)

You must already have a deposit, or you can start saving for a down payment, as most lenders require a percentage of the purchase price contributed by the buyer. While the traditional 20% down payment is ideal, a minimum of 5% products are available. There are various products, offers and schemes available that require lower down payments. An adviser will help you explore your options and aim to save as much as possible to gain you an affordable monthly mortgage payment.

For most residential purchases, you would need to contribute a minimum of 5% towards the property price. For instance, 5% of £200,000 = £10,000 or 10% of £200,000 = £20,000. But you need 25% if you are buying a Buy to Let Property.

Gather Financial Documents

Lenders typically require various financial documents to assess your eligibility for a mortgage.

  1. Gather documents such as Passport or driver’s license.
  2. Income: Employed applicant – 3 months’ Payslips & P60,
  3. Self- Employed applicant –Sole Trader: 2 years Tax Calculations (SA302) and Tax Year Overview (TYO)
  4. Director: Financial Accounts, 2 years Tax Calculations (SA302) and Tax Year Overview (TYO)
  5. Other Income: State Benefits, Pension & Investment income, Bonuses Maintenance income etc.
  6. Income and Expenditure Evidence: 3-month Bank statements.

Having these documents readily available can expedite the approval process and demonstrate your financial stability.

Factors that influence your maximum loan include.

a.       Income

b.      Employed or Self- Employed

c.      Other Income: –State Benefits Pension & Investment income

d.      Level of committed Expenditure:– loans, hire purchase, credit cards/store cards, dependants under 18, bills

e.     Credit Report: Default, County Court Judgment, Late Payments, Arrears, Bankruptcy, Insolvencies, Individual Voluntary

f.   Others: Type of Residency (Visa, Indefinite /British), Address history,

g.     Type of Property (high rise block)

Research Mortgage Options:

  • Your adviser will explore different mortgage options to find the best fit for your financial situation.
  • Consider factors such as interest rates, loan terms, and repayment options.
  • Compare offers from multiple lenders to ensure you’re getting the most competitive rates and terms.

Look for property

  • You can search for property in areas of interest on Zoopla, Rightmove, Onthemarket, etc.
  • Contact the Estate agent to make an offer on the property based on the offer guide, your deposit and maximum loan you can borrow.

Challenges in the mortgage market

It’s essential to be aware of current challenges in the mortgage market that may affect your application:

  • Rising Interest Rates: Fluctuations in interest rates can impact mortgage affordability and monthly payments. Be prepared for potential rate increases and consider locking in a fixed-rate mortgage to protect against rising rates.
  • Stringent Lending Criteria: Some lenders may have stricter criteria for mortgage approval, including higher deposit requirements and more comprehensive affordability assessments. Understand the eligibility criteria of different lenders and prepare accordingly.
  • Limited Housing Supply: Limited availability of housing stock can lead to increased competition among buyers and higher property prices. Be flexible with your property search and consider alternative locations or new construction developments. Navigating these challenges while following the steps outlined above can help you prepare effectively for the mortgage application process in 2024.

Here to help 

If you require further assistance, please contact us we’re here to guide you every step of the way through the Mortgage application process. As independent financial advisors, we have access to the entirety of the market and are regulated by the Financial Conduct Authority (FCA), ensuring your protection and peace of mind.

Kwasi A. Obuor-Asimpih (MLIBF, CPFA, CMA, FICB)

CEO & Financial Planning Consultant

Narian Lincoln (CA, CeMAP)

Financial Planning Associate

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