Applying for a Mortgage - FAQ
- Can I make an offer on a property without having a mortgage?
- What is a mortgage agreement in principle?
- How long does it take to arrange a mortgage in principle?
- How long does a mortgage offer last?
- What details to I need to apply for a mortgage?
- Is the mortgage agreement legally binding?
- Withdrawal of mortgage offer what can I do?
- What if I lose my job will the DSS pay my mortgage?
1. Can I make an offer on a property without having a mortgage?
Get a mortgage agreed in principle before you begin looking for a property, that way you know how much you can afford to spend on a property. This also puts you in a favourable position when making offer.
2. What is a mortgage agreement in principle?
A mortgage agreement in principle also known as a mortgage promise by some lenders basically means the lender has completed their credit checks and subject to confirmation of the details you have provided references etc. and the property being suitable security (after the valuation), the lender has agreed to advance you a mortgage. This provides you with the assurance that you can get the mortgage loan amount you require and the lender is willing to lend.
3. How long does it take to arrange a mortgage in principle?
Depending on which lender you choose you can sometimes get approval of your loan within minutes. It is worth noting that a mortgage offer is not a guarantee that the lender will give you the money for the property you want to buy. This will depend on the exact details of the property, the accuracy of the information you have supplied about yourself, and the outcome of credit checks.
4. How long does a mortgage offer last?
Most offers will last between 3-6 months, if however your purchase is delayed don't leave it to the last minute contact your lender and ask if they will extend your offer. If you do need to shop around again for another deal do so 2 months before your deal ends, if you are worried about rising interest rates then you can start sooner.
5. What details to I need to apply for a mortgage?
If you are employed: your past three months pay slips
If you are self-employed: your profit and loss statements and tax returns for the past three years
Some lender may take into account, regular overtime, bonuses, commission etc.
List of your bank account numbers, your bank branch address, current and savings account statements for the previous 2-3 months
List of savings bonds, stocks or investments and their approximate market values
Information about the purchase
Copy of the signed purchase contract
Credit card bills for the past 2-3 months
Details of other personal debt such as car loans, student loans and other personal loans
Documentation showing mortgage and/or rental payments
Documentation showing child support or divorce settlement contributions
If you do not have an established credit history because you have no loans or credit cards, you will need to prove your ability to pay by providing utility bills and details of other recurring obligations such as rent payments.
You may also be asked to prove how you raised your deposit and if the money was a gift from your parents or another relative, you may need to provide a signed letter stating that the money does not need to be repaid. If you can supply all these necessary items - it will greatly speed the mortgage application process up. Most of the delays that occur with mortgage applications as due to the borrower not being able to provide the right documentation.
6. Is the mortgage agreement legally binding?
All lenders can in extreme circumstances at any time prior to completion of your property purchase withdraw its agreement in principle and the full mortgage offer if they feel that there has been non disclosure or if your financial circumstances have changed and you can no longer afford the mortgage. Also any disclosures you make to your solicitor will also be reported back to the lender as the solicitor not only has a responsibility to you the buyer and but also the lender. The lender is therefore not obliged to give you a loan even if you have an agreement in principle, because its not legally binding.
7. Withdrawal of mortgage offer what can I do?
Note that it is possible for a mortgage product such as a fixed rate to expire, even though the mortgage offer remains valid. You should find out if your mortgage product has a completion deadline. If a mortgage product does expire it can always be replaced with another product from the lenders range available at that time, however the new product may not be as good.
8. What if I lose my job will the DSS pay my mortgage?
For help with your mortgage you must be getting Income support or Job Seekers Allowance (Income Based), this also means you can't have a partner who is working more than 24 hours a week or have more than £16,000 in savings.
If you are urgently claiming JSA Contribution based it will only last 26 weeks after which you either get Income based (if you qualify) or your payments stop. If you qualify for JSA your mortgage will not be paid for the first 39 weeks of a claim (providing you took it out after October 1994), it is capped at limit of 100K and it only pays the interest not a repayment of capital.