The Ultimate Mortgage Application Checklist

Beginning the journey to homeownership is incredibly demanding, and it can be difficult to know where to start with applying for a mortgage or even keeping track of what you have already done.

Navigating through the mortgage application process, and making sure everything is as it should be is crucial and it’s important to remain organised and thorough. As mortgage application specialists we’ve shared our comprehensive mortgage application checklist and delved into various aspects of the application process with you.

Deposits

Traditionally, mortgage lenders require a deposit ranging from 5% to 10% of the property’s value. However, a larger deposit can often lead to more favourable mortgage terms.

If you’re a first-time home buyer, exploring the option of opening a Lifetime ISA (LISA) – which provides a Government bonus to boost your savings – could be a potential avenue for you, to help keep your savings on track.

You will incur a lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime ISA.

By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:
(i) you may lose the benefit of contributions from your employer (if any) to that scheme; and
(ii) your current and future entitlement to means tested benefits (if any) may be affected.

Accumulating savings over time can help to showcase your financial stability and responsibility to potential lenders.

To better understand your financial requirements, it’s important to keep researching the average house prices in the area you wish to buy. This will help you to understand the minimum deposit required, and in turn, allow you to set realistic savings goals.

For existing homeowners, leveraging the equity within your current property can be a valuable strategy. By using the equity from your current home as part of the deposit for a new property, you could increase your chances of securing a mortgage.

When considering using your property’s equity, be aware of the Loan-to-Value (LTV) ratio, which measures the loan amount concerning the property’s value. Lenders often use this ratio to determine interest rates and deposit requirements.

Buy-to-let mortgages come with their own set of considerations. Lenders do typically impose stricter eligibility criteria for these types of mortgages, requiring a comprehensive understanding of potential rental income and associated risks. Some buy to let mortgages are not regulated by the Financial Conduct Authority.

Homeowners looking to expand their property portfolio should also explore the option of remortgaging. This is a process which involves refinancing an existing mortgage to release equity for a new property purchase.

Credit reports

Understanding how you currently use credit, and maintaining a good credit report is crucial. Monitoring this credit report can be a good way to make sure you’re on good financial footing. You can check your credit report and history by taking advantage of free reports provided by credit agencies such as Experian, Equifax and TransUnion. Being proactive in your approach will allow you to identify and address any issues promptly.

If your credit report reveals areas for improvement, you need to begin to take decisive action. Put together a plan to pay off any outstanding debts, secure any unsecured loans and credit, correct any inaccuracies and start to demonstrate responsible financial behaviour. Improving your credit score increases your chances of securing a favourable mortgage deal.

Mortgage lenders assess various financial metrics when evaluating your mortgage application. Your debt-to-income ratio is a primary metric, and this compares your monthly debt payments to your income. Affordability reports analyse your income and provide a comprehensive analysis of your current financial situation, helping you and lenders understand the amount you can borrow responsibly.

Identification documents

It’s important that during your mortgage application preparation, you ensure that your identification documents are available and have the correct information.

Begin by verifying that your passport is valid and up-to-date, as this is your primary form of identification. If you have a driver’s licence, this can serve as a valuable secondary form of identification – but make sure your image and address are correct and recent.

Before and throughout every stage of the mortgage application process, you must maintain a clean bank account record as lenders will scrutinise your financial transactions. A consistent and responsible financial history can positively impact your mortgage application. Make sure that any payment references are clean and correct – as these will be seen by mortgage lenders, and any unprofessional references may go against your application.

Within this process, make sure that you have correctly set up online, app and telephone banking – as this provides an easy way to monitor and manage your finances.

Document checklist:

• Identification documents
• Three months of bank statements
• Three months of payslips & P60 (if PAYE)
• Up to three years of company accounts (if self-employed or a company director)
• Full property details
• Proof of deposit

Begin your research

By engaging in the services of a mortgage adviser or broker, you can take advantage of their in-depth knowledge of the mortgage market and they can provide tailored advice based on your unique financial situation.

At Mr Mortgage Adviser, we provide whole-of-market specialist mortgage advice. We are passionate about finding you the most suitable deal for your circumstances, so make sure to get in touch with us to see how we can help.

During the application process

Obtaining a Decision in Principle (DiP) from a lender is a crucial step in the application process. This preliminary agreement indicates how much a lender is likely to give, based on the initial assessment. While it is not a guarantee of approval, it provides a valuable indication of your borrowing capacity – so you can begin to search for properties within the available price range.

Gathering necessary information and documents is a crucial step – and these documents typically include proof of income, employment details, and information about the property you wish to purchase. Having all the required paperwork organised and ready can help to make the application process less stressful, increasing efficiency and minimising delays.

A well-prepared, and informed approach to your mortgage application significantly improves your chances of success. If you’re beginning your mortgage journey, get in touch with us at Mr Mortgage Adviser where we can help you find the right mortgage available to you.

Your at-a-glance checklist:

• Save your deposit (5%-10% of the property value)
• Check and regularly monitor your credit report
• Register for the electoral roll as this can help your credit history
• Make sure you have no unsecured debt
• Check you are named on utility bills
• If you have one, ensure your credit card is well-managed
• Close any dormant credit and bank accounts
• Remove any old financial connections
• Improve your debt-to-income ratio
• Cut back on your outgoings, to ensure good affordability
• Update all ID information
• Clean & prepare your bank accounts
• Get in touch with Mr Mortgage Adviser