What conditions must be met to qualify for a mortgage in the UK?

by Molly Harris Molly Harris is a Mortgage Loan Officer

You will smile corner to corner when your mortgage application is signed off on, but you are supposed to meet certain conditions. The mortgage is the most expensive debt, and therefore no lender can process the application as quickly as they do for small emergency loans like payday loans.

The deposit size you arrange must be at least 10% of the value of your house. However, you can increase the limit up to 20% or more if you manage to stow away this much despite arranging a bigger down payment, a lender's decision depends on your repaying capacity.

If you fail to prove that you are able to pay down your mortgage, they will straightaway turn down your application. Further, you are supposed to submit all necessary documents. Any discrepancies in your documents can also keep you from fulfilling your house fulfilled. This blog discusses the conditions that you need to qualify for a mortgage.

The appropriate size of down payment

A deposit size is a foremost condition to get qualified for a mortgage. The lending industry has set the trend of submitting at least 10% of the market value of the house as a down payment. A couple of lenders are out there that are a bit lenient and accept applications with a 5% deposit size but only when you are a first-time borrower, and you have a good credit score.

The size of the down payment varies by mortgage borrower. For instance, if you have a bad credit history, a lender would expect you to arrange a bigger deposit size. In most of the cases, it is not less than 20%. It is always suggested to do some research before applying for a mortgage. Contact a mortgage lender to know what minimum down payment they expect from a borrower.

Here comes Mortgage in Principle (MIP), also known as Decision in Principle (DIP). In fact, most of the agents will take you seriously when you have an AIP. You could get it from a lender within a couple of minutes to know how much they would be able to lend you money if you were to buy a property. A lender would look over your income and credit history.

Some lenders run a soft credit check, while others run a hard credit check with your permission. Note that you may lose some credit points if hard inquiries are made. Knowing how much you will likely borrow will give you a clearer idea of the down payment size.

To avoid any complications, you must know how much money you are to pay down as a deposit size. If you apply for it through a broker, you can get all information without putting in much effort. The broker will do everything on your behalf in exchange for online mortgage advisor fees.

A consistent and stable income source

Another condition you need to meet to get the nod is a consistent and stable income source. If you cannot prove your repaying capacity, a lender will not approve your application regardless of the deposit size.

If you are a full-time employee, you will have to submit your pay slip for at least three months. However, this cannot be sufficient to convince a lender to prove your repaying capacity. Make sure that you have been the employee of the same company for over a year.

If you are running a business, your monthly income may fluctuate, but you still should be able to maintain a level. Make sure that your monthly profits are always above and beyond that minimum level.

What documents do you need to apply for a mortgage loan in the UK?

Having an appropriate size down payment and stable income source is not enough to be eligible for a mortgage application. When you apply for a mortgage application, a lender will peruse your credit file to get an idea of your past financial behaviour and afterwards they would ask you to turn in income documents. Here are the documents you should submit:

· Utility bills

· Proof of benefits, if any

· P60 form for your employer

· Your last 3 months’ payslips

· Passport or driving licence

· Bank statement of 3 to 6 months

· Statement of 2 to 3 years’ accounts of income if you are self-employed

· SA302 form if you have earnings from more than one income source

· Additional information along with tax returns gives detail about your income if you are self-employed.

Other things to remember to ensure the accuracy of your documents

Make sure you have arranged all documents before filling in the application form. You can ask about the documents required at the time of getting an AIP. Provide all necessary information, complete your application, and submit documents to the bank details you give. Follow the following tips on your mind when you provide documents:

· Do not round up your payment to the next nearest figure in the application. Just mention what your payslips say.

· Provide complete details of the house that you are going to purchase. A lender will ask an inspector to evaluate the market value of your house to decide if it is worth lending what you are asking.

· Be ready to be asked to provide additional papers as sometimes lenders may not be convinced with your repaying capacity.

· Each lender has different criteria for judging your repaying capacity, so some may ask you to provide some information about outgoings. Provide genuine information because otherwise, it will ruin your finances down the line.

· Ask your lender if they need any additional documents or information. Things become easier if you are applying with a mortgage broker.

· You will need hard copies of your bank statements, not print-outs certified by your solicitor or your bank.

The final word

Qualifying for a mortgage is not that easy. You will have to prove your repaying capacity, and if you have a bad credit score, it can be more challenging and tougher. For instance, a lender could be stricter about the down payment size.

Further, you need to provide additional documents to prove your income. A lender can ask you to submit various documents to process the application. You should contact your mortgage lender to know about them, or you can get this information during DIP.

If you are applying to a mortgage broker in Edinburgh, you can get this information from them. They will ensure the accuracy of all of your documents, so your application is not cast aside because of the lack of documents needed.