Step 1: Check Your Credit Score
Before beginning the mortgage application process, your credit score is an essential starting point. This crucial element provides mortgage lenders with insight into how you have managed your credit in the past. A strong credit score not only boosts your mortgage eligibility but can also unlock a broader range of mortgage options and potentially more favourable mortgage rates.
You can check your credit score easily for free with agencies like Experian and Equifax. Lenders consider various factors, including your income requirements for a mortgage and an affordability assessment, but your credit history provides the initial impression.
There are things you can do to help improve your credit score. For example, paying your household and credit card bills on time, keeping your credit card balances low, and checking that your personal details are accurate on your credit report. Doing these things can improve your credit score and make the overall home loan process smoother.
Step 2: Work Out How Much You Can Borrow
A crucial step in securing a mortgage is understanding your borrowing power. There is no point falling for a dream home in London if it is beyond your financial reach! Start by assessing your finances to confirm your available upfront funds and the additional cash you will need to borrow via a mortgage.
While general lending rules often consider factors like 4-4.5 times your income, remember that lenders also assess your overall affordability. You can enter your income and outgoings on an online mortgage calculator. This will give you an idea of how much you could borrow based on your income and how much deposit you can afford as a downpayment.
However, it is equally important to consider affordability. A mortgage calculator will work out your monthly outgoings and how much you can comfortably commit to mortgage repayments. This approach ensures you are being realistic about the home loan process and are better prepared for the formal mortgage application process that lies ahead.
Step 3: Save for a Deposit
Most mortgage lenders will expect buyers to place a deposit on their house purchase unless they are applying for a 100% mortgage. While the minimum down payment for a mortgage is typically 5% of the property’s value, remember that a larger deposit often gives you better mortgage rates and more favourable deals, making you a lower risk to mortgage lenders. For example, on a £300,000 property, a 5% deposit means saving £15,000 for your deposit.
For first-time buyer mortgage applicants, this can feel challenging, but various government schemes, such as the Lifetime ISA, can offer valuable support. While the average deposit varies regionally (e.g., it is higher in London compared to the north of England), aiming for a 10% or even 20% deposit can drastically improve your mortgage eligibility and the overall mortgage approval process. Saving for your deposit is a key part of the mortgage process and helps the entire home loan process go more smoothly.
Step 4: Get a Mortgage Agreement in Principle (AIP)
Once you have worked out your finances and saved up your deposit, the next step in the mortgage application process is obtaining a Mortgage Agreement in Principle (AIP), also known as a Mortgage in Principle (MIP) or Decision in Principle. This is something that estate agents often request, and while it is not a guaranteed mortgage offer, it is a strong indication of what a mortgage lender is prepared to lend you.
Obtaining an AIP demonstrates that you are a serious buyer, and ultimately, it can expedite your house viewings and confirm a realistic price range for your new home. Getting an AIP can be done quickly and easily online. An AIP also gives you the confidence to start actively searching for your new home, knowing that you are in a good position to have your offer accepted. This is a helpful first step for first-time homebuyers, as it provides them with clarity on their borrowing power.
Step 5: Compare Mortgage Deals or Use a Broker
With your AIP in hand, the next step in how to get a mortgage is to search the market for the best deal. You can compare mortgage rates directly between lenders and consider options like fixed-rate, tracker, or variable mortgage products. Remember to consider all associated costs, such as mortgage arrangement fees, and not just focus on the interest rate to understand the actual cost of your mortgage.
Alternatively, consider using a qualified mortgage broker if searching the market yourself feels overwhelming. A broker offers independent advice, assessing your specific circumstances and searching for the best mortgage deals available that meet your criteria. They can help you understand mortgage requirements and ensure you secure a deal that best meets your needs.
Going through a broker is particularly useful for first-time buyer mortgage applicants or those unfamiliar with the UK mortgage process, such as overseas buyers. Their expertise can lead to faster mortgage approval and a smoother home loan process overall.
Step 6: Find a Property and Make an Offer
With your AIP secured, you are now ready for the most exciting part of the home-buying process – finding your ideal property! Whether you are searching for a family home or an apartment in London, your AIP provides a clear indication of your borrowing capacity, narrowing down your property search to make it more focused.
When you find a property you love, it is time to make an offer. Remember to stick within your budget – do not overextend yourself, considering all the additional costs involved in a property purchase.
Understand that factors like the seller’s urgency can influence your offer; for example, a quick sale might mean they are open to a lower price. Once your offer is accepted, your mortgage application process will progress, with the formal mortgage offer becoming tied to this specific property. This is a significant step on your journey to your new home.
Step 7: Submit Your Full Application and Get Approved
This final stage in how to get a mortgage brings you to the crucial point: submitting your full paperwork. Your lender or mortgage broker will provide a checklist of required mortgage documents, typically including ID, payslips, and bank statements. Having these documents ready in advance will ensure a smoother and potentially faster mortgage approval process.
The lender will conduct a valuation of the property and thorough underwriting checks to ensure everything aligns with their mortgage requirements. Once satisfied and your solicitor meets all legal concerns, you will receive your official mortgage offer.
This confirms their willingness to lend and outlines the terms of your mortgage, which is typically valid for 3 to 6 months. This stage is the conclusion of your mortgage application process, moving you one significant step closer to exchanging contracts and receiving the keys to your new home.
What If Your Application Is Declined?
Even after completing these seven easy steps, your mortgage application could be declined. Don’t despair; this does not mean you won’t succeed the next time! Common reasons include issues with your credit score, excessive existing debt, or not meeting the income requirements for a mortgage.
Try to avoid immediately applying to another lender. Multiple applications can negatively impact your credit file. Instead, discover which credit agency your lender used and check closely for any errors.
Improving your credit history and reducing debt are key tips for getting a mortgage approved next time. Every lender has different mortgage requirements, so exploring options with a mortgage broker can find you suitable alternatives to get a mortgage more successfully in the future.
Your Path to a New Home Starts Here
Understanding how to get a mortgage in the UK can feel overwhelming, but as this seven-step mortgage guide demonstrates, breaking down the mortgage application process into manageable pieces makes it far more accessible. From understanding mortgage requirements and securing mortgage pre-approval to the final mortgage approval process, each step brings you closer to your dream home.
At Crown Luxury Homes, we are here to make finding your new home as smooth as possible. Whether you are a first-time buyer mortgage applicant in London, a home mover, or an overseas buyer seeking to buy your first property in the UK, we provide comprehensive support.
We will help you with your property search, connect you with high-calibre, trusted mortgage brokers and solicitors, and guide you through every stage of your property purchase. Let our friendly, experienced team help you succeed on this exciting journey; contact us at Crown Luxury Homes today to take the next step.
