What is a mortgage offer?
A mortgage offer represents official confirmation from a lender, that they will provide you with a mortgage that will enable you to purchase a property.
To receive a mortgage offer, you will first need to complete a mortgage application form & meet the lender’s affordability criteria, to ensure that you will be able to keep up with regular payments & pay them both in full & on time.
The mortgage lender will also need to carry out a survey on the property you wish to purchase, just to ensure that the value you are looking to borrow is equal to the quoted property value.
Important aspects to sort out before applying for a mortgage
If you are in the process of purchasing a property, you need to start planning early. Do you have a good credit rating? Have you done everything you can to ensure it is as good as it can be to help with your mortgage application? Do you have all the potential documents you need in order?
It’s also important to check if you are entitled to any help from the government, or if you can take advantage of any government schemes that are currently running. Such as the recent “Help to Buy – Mortgage Guarantee scheme”.
You will need to clarify exactly what type of mortgage it is you need & ensuring you have all your financial details & documents in order.
You may also find it useful to check out our contractor mortgage calculator, to help give you an initial idea of your borrowing potential.
It can be beneficial to get in contact with a specialist contractor mortgage broker, who can offer you advice & help you with your search for the best available mortgage deal on the market.
When should you apply for a mortgage?
If you have identified the property that you want to purchase & it is within your budget, it’s well worth putting the wheels in motion to starting your mortgage application.
It’s important to figure out what you can afford. Situations involving self-employment can be a bit different than standard mortgage applications, as the financial situations tend to be slightly more complex. On occasion, it can cause some potential home-buyers to miss out on a property, due to the fact that they couldn’t borrow as much as they originally anticipated.
Starting your mortgage application early also ensures that a purchase isn’t scuppered by any potential delays or disruptions that can arise with a mortgage application. Not only this, but it helps give you an advantage over rival buyers, who don’t have a mortgage in principle.
It is common for an estate agent & those selling a home, to want any potential buyers to already have a mortgage in principle when they are in the process of making an offer.
If you are looking to purchase a property with another party, whether that be a partner, parent or friend, then this will ultimately have an effect on how much you will be able to borrow, so it is important to sort out all the details on this front before you start looking for any potential properties.
What is an agreement in principle?
An agreement in principle (also known as “decision in principle”) is essentially an informal mortgage offer. It is used by lenders to show potential buyers that they are willing to allow them to borrow.
Agreements in principle are useful when actually making an offer on a property, as it shows both those selling as well as estate agents that you have a legitimate interest in purchasing the property, which in turn can help speed up the buying process.
An agreement in principle typically is valid between 2-3 months which should enable a potential buyer to put in an offer for a property.
You do have the ability to reapply for a mortgage in principle should it expire, however it should be noted that this will lead to another credit search by the lender. Too many of these can mark your credit score down.
Does a mortgage in principle guarantee an offer?
An agreement in principle does not guarantee that you will get approval for a mortgage offer. To receive a mortgage agreement in principle, lenders will ask you a few basic questions in relation to how much you are looking to borrow & your income (potentially some payslips to support this).
Lenders will then run a credit check on you, & your credit score will determine any major issues that would prevent you from being approved for a mortgage.
Check out our article, for some useful tips on improving your credit rating.
The mortgage application will go into deeper details of your financial history & look at aspects that may affect your ability to manage your monthly mortgage repayments.
Once you submit a full application, lenders may identify reasons why you should not receive a formal offer. This could be due to a plethora of reasons, but most commonly it is related to affordability or additional information that has potentially resurfaced from the credit check.
What if my mortgage in principle is refused?
If you find that your mortgage in principle is being rejected, it usually indicates that the lender doesn’t feel you would be capable of repaying the loan. It is best to reach out & learn exactly why you have been rejected & what you can do to rectify the issue before applying again.
What if my mortgage is rejected after receiving a mortgage in principle offer?
As mentioned, a mortgage in principle doesn’t necessarily result in an offer. There are instances when potential buyers have received a mortgage in principle only to later find that their application has been declined.
This usually occurs when something is flagged up in a deeper credit check or if you fail to meet the criteria set out by mortgage underwriters.
Similarly to if a mortgage in principle is refused, it’s important to learn the reason for the rejection. If you can fix the issue, you can reapply with the same lender, but be wary of running too many checks if you are aware of issues that still exist.
How long does it take to get a mortgage?
In some instances, you can find that a person is able to get a mortgage in as little as a couple of weeks, but for others, it can take from one to several months, every situation is different. The lender’s assessment timelines, as well as affordability criteria, will lend itself as to how long it will take to secure a mortgage.
How long do mortgage offers last?
Once you have secured a mortgage offer, there is usually a set period of time that the offer is valid, in order to complete a purchase. The range in which the offer is valid varies from lender to lender, although it tends to be within a 3 to 6 month period of when the mortgage was first offered. It can be longer should your property be in the process of being built.
If you are concerned that you will be unable to purchase the property within this given period, you will need to contact the lender and request an extension. These can typically be around one to two months, as long as you have suitable justification.
If they are unable to grant you this, you will need to reapply for a mortgage again.
For many of us, securing a mortgage is essential when it comes to purchasing a property. The team at Super Contractors has all the latest facts & information when it comes to securing your contractor mortgage, get in touch today.
We will provide you with everything you need to know in relation to relevant mortgage offers & how long you will have before each expires.
The mortgage offer establishes the foundations of your mortgage contract. It is confirmation that the lender is willing to give you a mortgage for a potential property.
Without having an efficient mortgage in place, you will be unable to purchase a home.
You will be able to confirm your mortgage application, once you go through your lender’s process and have provided them with efficient financial details, to ensure they can carry out effective affordability checks.
What to do if my mortgage offer expires?
Preparation is key. If buying a property is taking longer than expected, or if your mortgage offer is getting close to its expiry date, it’s important to reach out to your mortgage provider to try and secure an extension. Many providers seek a few week’s notice, so the sooner you make them aware of the situation, the sooner you could find a solution.
Even if the situation is entirely out of your control, whether the seller changes their mind or there are delays in relation to a new-build construction, all you can do is reapply in these situations.
Reapplying for a mortgage
You will need to follow the same process that you had previously done. You will need to go through the same provider checks in order for them to assess your ability to afford the mortgage.
As long as your situation hasn’t changed too drastically since your previous application, you will likely be accepted for the same mortgage again.
As mentioned, be wary of the fact that another credit check may have another impact on your credit rating.
Top tips for securing a contractor mortgage
Getting a contractor mortgage doesn’t have to be as difficult as you think. The mortgage application and approval processes for larger lenders has mainly been created for regular employees & not contractors. Though, with the right specialist knowledge, you could be on your way to getting a contractor mortgage.
1. Contact a contractor mortgage specialist
While it may seem biased that we suggest using a contractor mortgage specialist, it is a benefit. It is important that you get advice from a broker that is familiar with the contracting world so you can be sure the advice you receive is suitable.
For a contractor, working with a contractor specialist provides two key benefits; potentially access to more mortgage products, and a dedicated adviser who deals directly with head office. We have built relationships with contractor friendly lenders who provide mortgages based on day rate and current contract. Rather than the number of years you have been working as a contractor.
2. Save Money
Generally, you won’t get anywhere with a mortgage without a deposit. At the moment, you can secure a mortgage with at least 5% of the property’s value. Having a larger deposit will make you less risky for mortgage lenders and as a result, they’ll generally offer you more competitive mortgage deals with lower interest rates.
3. Have a clean credit rating
A super clean credit rating is key to getting your mortgage application accepted. You could have a good income and a good sized deposit, but your mortgage application could still be refused if you have a poor credit rating. Missing credit card payments or not being on the electoral roll at your current address can make all the difference.
4. Have Copies of your contract
A copy of a completely up-to-date, signed contract is a must. Ensuring that the length of service and day rate is clearly visible can be vital in securing a contractor mortgage. Lenders require this information as support for your application for a mortgage. It can save you masses of admin and the stress of having to supply three years worth of accounts.
5. Have your relevant documents ready
Make sure you have all the correct documents in order and to hand, these can include:
- Suitable ID
- Copy of Current Contract
- Last Six Months Bank Statements
- Copy of CV
This differs for the time you have been contracting for. See what documents you need for a contractor mortgage.
At Super Contractors, we specialise in contractor mortgages. We understand the financial status of contractors and work alongside head office underwriters who are contractor friendly to get our clients the mortgage they need.
For more information about getting a mortgage as a contractor, join us – call 0800 211 8700 or fill out our online enquiry form.
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
This firm charges a fee of up to £595 for mortgage advice. The fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.
Lifetime Finance Group Limited trading as Super Contractors is an Appointed Representative of PRIMIS Mortgage Network, a trading name of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority.