Thinking about leveling up and getting a better home? A mortgage could be the right decision for you. Getting a good mortgage isn’t always easy, so here’s a rundown of steps in applying for a home loan.
Think About Your Priorities
There’s a range of factors worth considering when choosing a mortgage lender, so it’s helpful to make a list of priorities. Do the factors depend on what’s most important for your needs, for example, is it the speed, the expenses, the rates, or the convenient and fast customer service? Everyone is different, so before applying, make sure beforehand that the mortgage provider caters to your needs.
Fill Out the Application Form
Take the time to carefully fill out the application form. Some information the lender will want to know is your credit score, as well as generally the state of your finances, the condition of your property, your assets, debts, and employment status. When applying for a mortgage, it helps if you’ve been working at a stable job for several years. Also, it can help if you assess the state of your property before making an application because if anything unexpected comes up, the lender could back out of the contract with you. Some documents you’ll need for a mortgage loan include proof of identity (a passport or driving license), proof of address like bills, bank and credit card statements, and proof of employment. This last document mentioned is the most important because it proves you can hold down a job, which means you’ll be able to pay back the loan without hiccups.
Take a Look At Your Loan Estimates
Before applying, it’s also helpful to take a good hard look at your loan estimates, meaning how much you’re entitled to borrow and at what rate. This way, you can calculate your costs effectively without any nasty surprises down the road. To get a more accurate estimate of your currency, it’s best to use an online calculator. If you live in the UK, then an Online UK mortgage calculator can be a very helpful tool in finding out what your installments could look like. That way, you won’t find yourself swamped by repayments that are higher than what you expected.
Apply For a Mortgage in Principle First
Lenders give you the chance to apply for what’s known as a Mortgage in Principle (MiP) or Agreement in Principle (AiP) first. Think of MiP/AiP like a test-run for the real thing. This way, you and your mortgage lender will both be able to see what kind of installments you’ll need to be paying. An AiP can run for about 90 days, during which you can see, without any real financial risks, what kind of costs you’ll be facing. Also, if anything changes in your employment or financial status during this period, you can see how that will affect your repayments down the road. It’s a seamlessly helpful tool. AiPs also don’t affect your credit score because it’s not a done deal. That being said, please be advised that just because you’ve got an AiP, it doesn’t automatically mean that the lender will actually sign off with you on the real thing.
When Choosing a Lender, Fees Are Important
When making the decision, look at fees included in the mortgage loan you are getting. As of 2016, all mortgage lenders must give detailed information about all of their fees in a transparent way. Typical fees relating to mortgage loans include the arrangement fee (also known as a product or completion fee), the booking fee, the valuation fee, telegraphic transfer (or CHAPS) fee, the mortgage account fee, the mortgage broker fee, and the insurance arrangements fee. Also, in the case of missed payments, lenders also charge a sum, and even in the case of early repayments, you could find yourself paying a fee! Not all mortgage lenders charge the same fees, so it’s definitely worth double-checking first. In addition, go with a lender you trust, which doesn’t pressure you into a deal that isn’t suited to your needs.
Be patient. The processing of a mortgage loan can take time, several weeks even. On average, a borrower must wait for around 6 weeks for the mortgage loan to be completely processed. That is just the average period of processing a mortgage loan. During that time period, the lender will assess your financial situation and may ask you for documents about your wages and employment. They can even look at your tax records just to be sure. After all, nobody wants to take too many unnecessary risks. If you’re self-employed, you’ll need one year of audited tax returns to prove your ability to make money.
Accept Your Final Mortgage Offer
After the mortgage lender has processed and accepted your application, they’ll contact you about their final mortgage offer. Read the contract carefully, and if you find everything to your liking, sign the contract. Double-check that all the conditions are exactly as you agreed to. Also, be advised that a lender is under no obligation to honor their contract if you go ahead and buy a different property than the one you contracted to. Home loans are usually tailor-made to the purchase of a specific property with its own value. Any change will upset the lender’s calculations, meaning they walk away from the deal. So when you contract with the lender, make sure your choice of property to purchase is final. Typically the lender makes the payment from their account once they’ve received the purchase money from your solicitor.
Exchange Contracts With the Seller
As you’re more than likely buying a property with the mortgage funds, the lender will send you the amount the day before the completion day (the day when a property is legally transferred from seller to buyer). Exchange contracts with the seller, and make sure the price is exactly as you agreed on. Note that after purchasing, you must also pay the Stamp Duty Land Tay, search fees, and the Land Registry’s registration fees, which are all related to transfers of property. After this, you can enjoy your new home.