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Wednesday, 3 October 2012

Mortgage application process

Once you know roughly how much you want to borrow and have identified your preferred lender, there are key steps to follow to get a mortgage. These are the same whether you're borrowing for the first time or changing lender.

Key steps in the mortgage application process

If you understand the application process you can be ready with everything the lender needs. This can help speed up your mortgage application.

Agreement in principle

A lender or mortgage adviser may offer to give you an 'approval', or 'agreement in principle'. This sets out what the provider will probably be willing to lend you based on certain terms and conditions. This can be helpful when you have chosen your mortgage and are ready to make an offer on a property.

Never be tempted to overstate your income. You could end up with a mortgage you can't afford.

Choose a solicitor or licensed conveyancer

You'll need someone to carry out the legal side of things - local searches, drawing up contracts and other legal paperwork. You could use a conveyancing solicitor or a licensed conveyancer - or even do part of it yourself (but make sure you know exactly what you're taking on). Some lenders have preferred solicitors, or you may be able to get a personal recommendation. You can also search online or in the phone book. (The lender will insist on a professional conveyancer to carry out the valuation.)

Make a full mortgage application

When you've decided to buy a property, you make a full mortgage application by completing and returning the lender's form (you can sometimes do this over the phone). They'll usually also want to see evidence of your income, your identity, your current address and (where relevant) a previous lender or landlord's reference. They may also want a non-refundable fee to cover their costs and perhaps to pay for a valuation.

If you can't prove you've got a regular income (maybe because you're self-employed and don't have enough proof) you may be able to get a self-certification mortgage. This usually requires a larger deposit and the lender may still want some evidence of your ability to pay.

Reference checks

Your lender may get written references from your employer and bank (or accountant if you're self-employed) and your current lender or landlord. They'll also run credit checks to make sure you've paid off your debts in the past.

Property valuation

Your lender will usually have the property valued to make sure it's worth the price you've agreed to pay. If it's not, it could affect how much they'll lend you. It's advisable to get your own survey done too or to upgrade the lender's valuation survey to a more detailed one.

The mortgage offer

If the lender is happy with the valuation and references, you'll be made a formal offer - usually sent to you and your solicitor. Once you (or your solicitor on your behalf) have signed and returned the offer documents, your lender is committed to providing the money. The mortgage offer usually requires you to take out buildings insurance, in case something happens to the property before you've paid off the mortgage.

Exchange and completion

If you're buying, once you've got a formal mortgage offer, your solicitor can agree a date for exchanging contracts with the seller's solicitor. At this time you usually pay a percentage of the purchase price as a non-refundable deposit and commit to paying the rest on the agreed completion date (when the property becomes yours).

Applying for a mortgage online

You may be able to apply for your mortgage and track its progress online.

Applying for a mortgage in Scotland

In Scotland, you arrange your mortgage before you make an offer on a property.

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