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Making an application for a mortgage

Once you've worked out how much you want to borrow and what kind of mortgage you want, it's a good idea to apply for a mortgage early, so you can act quickly when you find a property you like.

When should I apply?

Once you've chosen the right mortgage for you, you should apply as soon as possible. After you've applied you'll know how much you can afford to pay for a property and be ready to place a bid when you find a property you want.

How do I apply?

You'll need to make an appointment with your lender to apply for a mortgage, fill in a mortgage application form and ask for a mortgage certificate.

Making an appointment with your lender

There are a few thing that you'll probably need to bring along to this:

  • three months' pay slips from your employer, or copies of your accounts for the last three years, if you are self-employed
  • proof of the length of your contract, if you are a contract worker
  • copies of three months' bank statements
  • copies of 12 months' previous mortgage statements, or
  • proof of regular rent payments (for example, a rent book or bank statements showing your payments)
  • details of any contents and buildings insurance policies you have
  • details of any life endowment policies you have.

When you make the appointment, ask the lender if there is anything else you need to bring.

Filling in a mortgage application form

The application will ask for details of your income, savings and outgoings, as well as your employer, bank and any previous mortgage lender or landlord. The lender will usually contact them and run checks with credit reference agencies for any history of bad debts or repossessions of property you've owned before. You can apply to check what information the main credit reference agencies, Experian, Equifax and Callcredit hold on you on their websites. You can find out more about credit reference checks from MoneySupermarket.

Getting a mortgage certificate

Based on your application, the lender may give you a mortgage certificate or mortgage promise stating in principle how much you can borrow. This can be useful if you need to show the seller that you are a serious buyer, but it isn't a guarantee that you'll definitely get a mortgage for that particular property.

What happens when I find a property I want to buy?

Once you've applied for a mortgage and found a property you like you'll need to get the property valued, find a deposit and then continue with your mortgage application.

Getting the property valued

Most sellers should provide a home report, which includes a survey of the property and an energy report. However, if your mortgage lender will not accept the home report as a basis for lending you money, you may have to get your own survey carried out.

There are different kinds of home valuations and surveys you can get if you are interested in a property. You, your solicitor or your lender can arrange to get the property valued but your lender will only accept valuations from certain valuers that they have already approved. It's important to make sure that any valuer or surveyor you hire is approved by your lender beforehand. If your lender arranges the valuation you may get the valuation fee refunded once the mortgage is finalised.

Finding a deposit

If the valuation is lower than the price you need to pay, you will have to decide whether you can find the extra cash upfront, or whether the seller is likely to accept a lower offer from you.

For example, if you are bidding £105,000 for a property worth £100,000 and your lender will only lend you betwen 70 and 90 per cent of the value (£90,000), you'll need to come up with £15,000 for a deposit.

If you are sure you can afford the deposit, and the other costs of buying a house, you can put in an offer.

Proceeding with your mortgage application

If you have made an offer which has been accepted, you can formally apply for your mortgage. You can usually borrow up to between 70 and 90 per cent of a property's value (this is sometimes called the loan to value ratio or LVR), so you will have to find the rest of the purchase price as a deposit. Remember the 'value' is what the lender's valuer thinks the property is worth, and this may be less than the price you'll actually have to pay.

If the lender approves your mortgage application, they will make you a formal mortgage offer. There may be conditions attached to the offer, for example, you may have to carry out certain repairs or improvements within a specified period. The lender may withhold some of the loan until you have done this.

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The important points

  • When you've applied for a mortgage you'll know how much you can afford to pay for a property.
  • You'll need to make an appointment with your lender to apply for a mortgage and probably supply evidence of earnings and previous rent or mortgage payments.
  • Your mortgage lender will need to check your credit rating as part of your application.
  • Once you've applied, your lender may give you an agreement in principle to say how much you can borrow, but this isn't a guarantee your lender will definitely give you a mortgage on this property.

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