7 steps to secure a mortgage agreement in principle

The critical steps required in securing a mortgage agreement in principle:

1. Obtain a copy of your credit file: Your credit file is your financial CV. This is the first document a lender looks at before they make a decision to lend you money. Therefore, at least make sure it contains accurate information. You can obtain a copy of your credit file from Experian, Equifax, or Call Credit. It’s not uncommon for some credit agreements to be omitted (not deliberately) by some credit reference agencies. For example, it’s possible that your bank account and credit card is recorded with Experian, but it’s not showing on either Equifax or Call Credit and vice versa.

2. Make sure the information recorded on your credit file is accurate and up to date: Ask them to remove or amend any incorrect information and make sure they update your credit file as soon as possible. Tell them you are applying for a mortgage and the adverse/incorrect data is jeopardising your chances of buying your dream home.

3. Complete a Financial Questionnaire / Fact-Find: This document provides a financial overview of yourself and is the most critical document in determining your mortgage eligibility and options. The key points are: Your full name, date of birth, four year address history, home and mobile numbers, marital status, dependents, nationality, occupation, three year work history, income and monthly expenditure, assets and liabilities (loans, credit cards), how much are you looking to borrow and purchase price or value of the property in question. Finally, if you have any adverse credit (e.g., defaults, CCJs), we need to know the amounts and whether they have been satisfied or not. This should be stated in your credit file.

4. Complete a detailed income and expenditure form: Look at your last three months’ bank statements to see what goes in and out. This is what the lender is going to forensically analyse to determine how much they will lend you. If your bank statements demonstrate financial strain at the end of the month and you are looking to borrow more than 4.5 x your income, then it’s not going to happen. Your options are clear: Either cut down on your expenses, buy a cheaper property, or apply when your finances are in better shape. Just as night follows day, interest rates will go up at some point and as a result, lenders are stress testing your affordability to pay your mortgage if the rate were to increase to 7%.

5. Get all your documents ready: Collate your last three months’ bank statements and pay slips, latest P60s, a proof of address dated in the last three months (this could be a traditional bank statement as opposed to an online print out), electricity, gas, water bill. For identification: You will need a valid passport and or driving licence. If you are self employed via a limited company, then have your last three years’ trading accounts; if sole trader, request your latest SA302s from the Inland Revenue. The mortgage cannot proceed without these documents.

6. Decide on a mortgage channel: Do I go direct to a lender or use a whole of market independent mortgage broker? If you want a second opinion, try both channels. Weigh up the pros and cons of each channel and make a decision.

7. Find and instruct a good solicitor: A number of lenders require you to use a firm with at least 2/3 partners. Other lenders stipulate that the firm of solicitors must be on their preferred solicitors panel. The new accreditation on the block is the Law Society’s Conveyancing Quality Scheme (CQS). If you’ve sorted your mortgage, ask your solicitor if they are your lenders panel. Savvy solicitors normally tell clients up front which banks they cannot represent.

The truth of the matter is that whoever you approach to arrange your mortgage will be incredibly busy (the good mortgage advisers are), and they will want to ensure they process your mortgage application as soon as possible to ensure they comply with TCF (treating customers fairly). Undoubtedly, the process can be stressful, especially when you have agents chasing you for your mortgage offer and implying that there are other interested buyers with bigger pockets looking to pounce. Therefore, presenting all this information to your mortgage adviser day one will earn you huge respect, and most importantly, it will enable them to get your mortgage approved and offered in a shorter time frame. Let’s face it, we all want to work with professional clients that make our busy lives easier.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans and commercial loans.