Required Mortgage Documents and the Initial Process
When applying for a mortgage it pays to remember that you are asking to borrow you a huge amount of money. This is partly the reason lenders and brokers require a lot of documentation, which to some the requests can seem a little excessive at first glance.
Even if its your own bank and you have a healthy financial relationship with them regulations require banks and financial institutions to follow strict criteria.
Lenders must be able to prove they have followed a robust process to assessing your ability to repay what you are applying to borrow. This is commonly known as affordability checks.
A typical list of documents will look something like this.
• Proof of ID a Copy/Scan of your Passports or Driving License
• Proof of Address – A utility bill from the last 3 months (Gas, Electric, Telephone or Water)
• A copy of your credit report (available free from https://www.noddle.co.uk/)
• 3 Months Bank Statements (for each applicant if individual or a joint account)
These documents provide sufficient proof of your identification as well as offering an insight to your ability to afford a mortgage.
In addition, lenders are required to verify your income by collecting the following.
Employed People will need to provide
• 13 weeks/3 months payslips
• P60 (Great if you have it although not always required)
Self Employed will need to provide
• 2-3 Years SA302 plus matching Tax Overviews
If you are a newly established business some lenders may use a combination of SA302’s with accountants’ projections.
Additional Documents and Procedures
The Fact Find
As well as providing documents you will also be required by brokers to take part in a fact-finding procedure. The regulatory body the FCA have a huge focus on “knowing your customer” and this document not only satisfies the regulator, but it also ensures that you get advice that meets your individual needs.
Please invest your time and be open with your broker about your situation during the fact find. Brokers are there to help, it is in both of your interest to secure the lending from a bank. Omitting facts such as previous credit issues may delay the process and make the job more difficult.
Whats is a fact find?
A fact find consists of Hard Facts and Soft Facts which combined allow your adviser to understand your current position as well as your future needs and desires.
Hard facts can be simple data such as your Date of Birth and Size of Deposit, current marital and employment status. A lot of the hard facts will be gathered and verified from the documents you provide.
Soft Facts are details about your plans and objectives which are generally more intangible. The goal is to find out
Why? How? and What?
These questions will cover your feelings with regards to what you have and what you desire.
Here is a typical example.
Why do you want to buy this property?
How do you feel about your current arrangements to cover mortgage payments in the event of you being unable to work?
Some questions may appear to have obvious answers, expand on these answers and explain the driving factor behind your answer. Please also think about future needs and discuss them fully with your adviser, some mortgages have 5 or 10 year terms. This length of time may conflict with future plan to move up the property ladder. Careful research will need to be undertaken prior to locking yourself to a lender which could restrict future plans.
As you have probably gathered the fact find is going to require some investment of your time and energy. Prior to making this investment you will want to make sure you have found the right broker for you.
You need a broker who has the right level of experience and expertise around your specific need as well as a someone who’s fees you are happy with.
Mortgage Broker Fees bring me on to an important part of the process.
Mortgage Process Compliance Documents.
The FCA insists that initial disclosure requirements are provided ahead of the fact find process.
As we have already identified the fact find will require some investment from you, its only fair you are made fully aware of the costs involved prior to making that investment. A good broker will always cover the compliance needs at the outset making you fully aware of the fees involved as well as;
• Contact Details
• Communication Method
• Authorisation and Regulator
• Independent or Restricted Advice
• Investment Management
• Third Party Responsibility for Client Money
• Charging Structure
• Total Charges Payable
• Complaints Procedure
All of this information should be included in a document your advisor will provide to you, this may be referred to as the IDD (Initial Disclosure Document) or CIDD (Combined Initial Disclosure Document)
This document clarifies the use of the property and who will be occupying the property on completion of the mortgage.
You will be required to declare that the property is either for the purposes of your main residential property or a Buy To Let property.
When buying a main residence rules exist that restrict you from letting the property to tenants or generating rental income. In some future circumstances lenders may permit you to let your main residence to tenants giving what is known as consent to let.
When purchasing an investment property and using a specific Buy to Let Mortgage rules exist around who can live in the property. Tenants can not be family members and the landlord themselves are also restricted from occupying the property as a residence.
GDPR and the mortgage process
The General Data Protection Regulation came in to force on May 25th 2018 and applies to personal data relating to indivisuals who can be identified.
During the process outlined above in this article you will disclose a large amount of sensitive data about yourself, GDPR sets the standards required for the handling and storage of that information.
Your advisor should provide you with a document which explains;
• Why should you read the document
• What is meant by “Your Personal Data”
• The basis upon which a Firm will deal with Your Personal Data
• The basis upon which a Frim will process certain parts of Your Personal Data
• How Your Personal Data is collected
• What happens to Your Personal Data when it is disclosed.
• Sharing of Your Personal Data
• Security and retention of Your Personal Data
• Your rights in relation to Your Personal Data
• How to make contact with the Firm in relation to the use of Your Personal Data
I hope this article provides a comprehensive outline to what documents you will need to provide and what to expect from your adviser, if you have any further questions call me to discuss or send an email detailing your query.