Before lenders can give you a mortgage, they need detailed, verifiable information about your financial profile. This post is all about getting your application materials in order, so you’ll be fully prepared when you find your first home. For a more complete view of the application process read more about applying for a mortgage online.
Lenders are required to be risk-averse. They need to be sure your loan is affordable both now and later. Lenders want a comprehensive view of your current finances and they will also check your history to ensure that you don’t have any history of bad debts and missed repayments.
For example, lenders will want to know:
How much are you earning? How much of your annual income is a bonus or overtime?
Are you in permanent employment or are you on a fixed term contract? Are you on a probation period?
Do you have any outstanding loans? How much do you repay each month? Do you have any credit cards?
Do you have a good repayment history or do you have a history of missed repayments? You can check the central credit register here
The documents you’ll need
The best way for a lender to verify this information is by collecting documentation that shows your employment status, income and ability to save. For example, If you are a first time buyer lenders you will typically need:
- Most recent P60
- 1 or 2 years of business tax returns (if you own more than 25% of a business)
- 6 months of bank statements
- 3 months payslips
- Salary Certificate (we will send this to you to be completed by your employer)
It can be quite onerous to collect all of these documents and send to a broker but we have a file upload process that streamlines the process. Collecting and submitting these documents is often the most frustrating part of the process as it can involve liaising with your HR department, banks, credit union etc.
How will lenders view your documents?
It's helpful to understand how your documents are viewed in your mortgage application. If a large portion of your income comes from bonuses and overtime it’s viewed as less stable than your normal salary.
Lenders need to know how secure your job is before they can start looking at your income. Some banks view employees on fixed term contract more favourably than others, likewise with the self-employed. Lenders will need a salary certificate to be completed and signed by your employer to ensure verify your employment status.
Lenders want to see your bank statements to make sure that will be able to pay your mortgage back once you take it out. A visible history of savings and rent repayments will help you here. Banks view rent as money you can put towards a mortgage repayment - you won’t need to pay rent if you own your own house.
It’s a lot of information but getting your documents in order, especially if there are any special circumstances in your financial profile, can help ensure that your application process goes smoothly and quickly. It also helps ensure that there aren’t any surprises regarding how much you’re qualified to borrow.