How to prepare for a mortgage application
It’s fair to say that buying a house is one of the most exciting things that you do in your lifetime. However, if you ask anyone who has bought a property in the past, they may well also say that it was one of the most stressful times of their lives.
In most cases, this stress occurs due to holdups during the process. These holdups not only cause stress due to time constraints but also caused concern for the seller which in turn might mean that they pull out of the sale, causing all previous efforts to be wasted. The vast majority of these holdups can be reduced by planning in advance.
In this article, we’ll look at all the things that a buyer should do before placing an offer on a property to ensure that everything runs as smoothly as possible. No two sales are exactly the same, it is not exhaustive but should give the vast majority of people the information they need to ensure that they are well prepared.
Documents
Lenders will only give you money if they believe that you can afford to pay it back. Contrary to some people’s belief they do want to give you money as that is the way that they make a profit, but they do require proof that all that you tell them in your application is correct. There are many ways that they obtain that proof, one of which is to ask you for documentation. In some cases, they rely on the broker to check most of that documentation on their behalf, which is why they offer the broker a procuration fee or payment when cases are handed over. It then becomes the broker’s responsibility to check the proof on the lender’s behalf. Either way, you will need to provide documents to the broker in advance of the application.
Below is a list of the basic documentation that your broker is likely to ask you for.
Proof of income
this may consist of three months’ pay slips if you are employed, or up to three years’ worth of your company accounts or tax returns (SA302 and SA100) if you are self-employed. We suggest you get these prepared prior to talking to a mortgage broker. If you do not know what SA302 and SA100 documents are then we suggest you ask your accountant. You may also be required to prove that your business is still trading at the same level that you’re accounts show by providing 3 months’ worth of business bank statements. This is not always the case but it is best to have them prepared in advance.
Proof of identity
this is most commonly provided in the form of a passport or a driving license. Other documents can be used but these are considered the easiest to verify.
Proof of address – if you have used your passport for your proof of identity then it is possible to use your driving license as proof of address. Many people have the wrong address on their driving licensee. Not only is this illegal but it could affect your mortgage application. It is possible to change this within approximat ely 48 hours by completing the change of address section of the government’s website for driving licenses. That service is free if it is simply a change of address. Other documents you can use as proof of address are your council tax bill or any utility bill all bank statement that has been dated within the last three months
Proof of expenditure
lenders will usually ask for three months’ worth of bank statements in order to assess how much you spend both on credit and on general outgoings. Having three months’ worth of bank statements ready to go is crucial in allowing your broker to ensure that they place your case with the right lender.
As part of your documentation preparation, it is important to ensure that everything that you pay for is registered to your current address and also that you are on the electoral register at your current address. It is very common for people to have credit commitments and bank or building society accounts that are registered to previous addresses. This is very common in the younger first-time buyer population, especially the student population, where accounts are still registered to their parents’ addresses. It is not as difficult as it used to be to update these addresses. In most cases, this can be done via an app on the phone or by logging into online accounts.
Credit score
Thanks to more companies appearing in the market that offer free credit reports, it has become more common in recent years for people to keep a close eye on their credit scores and credit report on a monthly basis. However, more than half of the population still does not do this. Not only will your credit report give you an idea of how well you are doing compared to the rest of the population, but it may also highlight whether your details have been used in a fraudulent manner, perhaps by someone impersonating you. It is a common occurrence for people applying for a mortgage to find that the lender sees something on their credit report that they did not know about. This can lead to a mortgage being declined. Therefore, checking your own credit score well in advance, and continuously on a monthly basis come on is an important habit to get into both generally and when applying for a mortgage. If there is something on your credit report that you think is incorrect or suspicious you should contact the credit report company to ask for a correction to be made. If it looks as though someone other than yourself has taken out credit under your name, having spoken to the credit report agency, then you should consider contacting the police.
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