How to get a mortgage

What do I need to apply for a mortgage?

To apply for a mortgage, you should have:

1. A deposit

The very first step is to save up a house deposit, as this will take much longer than the rest of the process. At an absolute minimum, you'll need to save 5% of the cost of the property you want to buy, but the bigger the deposit you put down, the better access you'll have to rates and deals.

2. Checked your affordability

It's worth being roughly aware of what size of mortgage you can afford so you can budget accordingly. Lenders will typically lend you around 4.5 times your annual income, but they also take your spending habits into account.

Our mortgage affordability calculator can give you an idea of what you might be able to borrow based on your income and the amount of deposit you currently have saved.

At the same time, make sure to check your credit score as lenders will also review this when it comes to your affordability. While bad credit doesn't necessarily mean you won't be accepted for a mortgage, it can limit the deals available to you. So, take steps to improve your credit score if necessary.

3. An agreement-in-principle (AIP)

Also known as a mortgage-in-principle or decision-in-principle, this document outlines what a bank or building society would be willing to lend you if you applied for a mortgage with them. A mortgage broker or lender can normally provide one to you once you've given them some details.

This doesn't guarantee your application will be accepted, but it does make it easier to know what your budget is for a home and makes the application process easier. Estate agents may also ask to see this document to check you are serious about buying a home.

4. Mortgage application documents

Once you've had an offer on a property accepted, you can begin the formal mortgage application. As part of this, lenders will require a number of documents from you. Here's what you need:

• Proof of ID - passport, photo driving licence, national identity card or bio-metric residence card

• Proof of address - bank statement, credit card bill, utility bill, or mortgage statement dated within the last three months, or council tax bill, HMRC coding letter (the one showing your tax code), benefit entitlement letter, state pension letter, or tenancy agreement dated within the last 12 months

• Proof of income (employed) - three to 12 months worth of payslips and bank statements, as the length needed can vary by lender. Some lenders will be willing to consider a letter from a manager or HR department if you don’t receive payslips, however, this is at their discretion and it’s much better to have payslips if possible. Three months of bank statements will also be needed

• Proof of income (self-employed) - 12 to 36 months worth of your full accounts (signed-off by a certified accountant) and end of year tax calculations (used to be known as SA302 forms) for the same duration. A tax year over

  view for the most recent year can also be helpful. You will also need to provide bank statements covering any personal and business accounts

• Proof of deposit - this will depend on how you obtained your deposit, but may include savings account or investment statements, proof of sale for any items that may have been sold towards your deposit - such as a car or property, a certificate of inheritance or a signed letter from the provider of a gifted deposit

Some lenders and brokers allow you to upload your documents online which can save a lot of time when it comes to the mortgage application process. Make sure you download and upload them in the correct format to save any unnecessary delays.

5. A mortgage broker

While you can apply for a mortgage yourself, it's often advisable to use a mortgage broker. They can review your circumstances and make sure you apply for deals you're more likely to be accepted for.

There are different types of mortgage broker, and depending on which you use they may be limited to products from certain lenders. An independent or whole-of-market broker can compare mortgages from across the market to find the right deal for you.

How much money do you need for a mortgage?

The largest sum of money you’ll need to find is the deposit, which will be at least 5% of the cost of the property you’re looking to buy. If you can afford to save 10-15% towards your first home, however, this can make a huge difference to the lender’s decision.

For example, to buy a house that costs £250,000 you would need

• £12,500 for a 5% deposit

• £25,000 for a 10% deposit 

• £37,500 for a 15% deposit

• £50,000 for a 20% deposit

You will also need to have enough income to cover the monthly mortgage repayments. Most lenders calculate your loan size based on four to four and a half times your annual income. If you apply jointly, your income will be assessed slightly differently and this will vary by lender.

Typically, lenders either your combined income multiplied by a slightly lower number, perhaps three and a half, or use four and a half times the highest earner’s income plus the lowest earner’s income. 

For example, to borrow £200,000  

• An individual would need to have an income of between £44,444 and £50,000

• A couple would need to have a joint income of around £57,143  - although this will depend on how they calculate your combined income 

Of course, in reality, the income will need to be higher than this, as lenders will need to take your other outgoings into consideration when calculating how much you can afford to repay. Some lenders also have a minimum income needed for any mortgage, regardless of loan size, which is generally £20,000-£25,000.

With the cost of living and house prices at an all time high, it can be very difficult for first time buyers to meet the deposit and affordability criteria of a mortgage, however, there are a range of home ownership schemes to help people get a foot on the property ladder.