Your complete guide to getting a mortgage

Understanding the steps involved can significantly ease the path to securing your dream home

Navigating the mortgage application process can seem daunting, whether you’re a first-time buyer or returning to the housing market after years away. Understanding the steps involved can significantly ease the path to securing your dream home. Preparation is key, from knowing what lenders look for to how you can increase your chances of success and avoid unnecessary delays.

How much deposit do you need?

When working out how much deposit you’ll need, it’s worth noting that most lenders require a minimum of 5%. However, the larger your deposit, the cheaper your mortgage rate will likely be. This makes exploring how you can save and maximise your deposit in the run-up to applying for a mortgage is worthwhile. A gifted deposit can be helpful if you’re fortunate enough to have a supportive family willing to assist.

Another resource to consider if you’re aged 18-39 and buying a home for the first time is the Lifetime ISA (LISA). With a LISA, you can save up to £4,000 each tax year, and the government will top up your savings with a 25% bonus – up to £1,000 annually. Alternatively, schemes like shared ownership can make homeownership accessible with a smaller deposit. Guarantor mortgages are another viable solution, allowing loved ones to help by putting up security rather than offering money outright.

Preparing for your mortgage application

The six months before applying for your mortgage are crucial. Use this time to get ‘mortgage ready’ by addressing key areas of your financial health. Start by checking your credit rating. If there are any errors on your report, ensure they are corrected quickly, as they could raise issues with lenders.

Additionally, ensure you’re registered to vote. Being on the electoral roll is vital; lenders use this information to verify your identity and prevent fraud. If you’re not eligible to vote, you can include a notice of correction with proof of address to avoid difficulties. Keeping your bills up to date is also essential—set up Direct Debits wherever possible to avoid missed payments, which could impact your credit score.

Boosting your financial profile

Steering clear of overdrafts in the months before your application is another important step, as some lenders view recent overdraft use as a red flag. Similarly, avoid applying for new lines of credit in this period, as frequent credit searches can raise concerns with lenders.

Reducing your spending will also work in your favour. Lenders will scrutinise your outgoing expenses through your bank statements, so demonstrating a disciplined approach to your finances can increase your chances of approval. Cutting back not only boosts your credibility with lenders but can provide you with additional financial breathing room during the property-buying process.

How lenders assess your application

Lenders will carefully examine your household income, regular expenditures, and any outstanding debts when deciding how much they are willing to lend you. They need to ensure you can comfortably afford the monthly payments on your mortgage. Your credit history is equally important. Lenders will analyse your credit report to gain a clear picture of your financial habits and reliability.

It’s also worth thinking ahead about the required documentation.

Compile essential documents early, such as identification (passport or driving licence), your last three months’ payslips, and your most recent P60. If you’re self-employed, you’ll need statements covering two to three years of accounts. Lenders will likely also request your current account bank statements from the last three to six months and details of your regular expenses, including loans, childcare costs, and general living expenses.

Securing a mortgage in principle

One step many prospective home buyers overlook is obtaining a mortgage in principle (also called an agreement in principle or decision in principle). This is essentially a statement from a lender stating how much they could lend you based on your income and outgoings. While not a guarantee of a mortgage, it shows you’re serious and prepared when bidding on a property.

It’s wise to get a mortgage in principle as early as possible, even before you start house-hunting. Once you’ve found your desired property and your offer has been accepted, you can move on to the formal mortgage application process, which involves a full credit check and property valuation.

Moving from application to completion

After submitting your formal application, lenders will assess all the provided information, conduct additional checks, and, if satisfied, issue a formal mortgage offer. Once your solicitor informs them of your completion date, the lender will transfer the agreed loan amount to fund your purchase.

At this stage, it’s essential to remain responsive and proactive, ensuring there are no unnecessary delays. With all the moving parts coming together, you’ll soon be ready to take ownership of your new home.