Important Information i

From Friday 23rd February, we have made rate reductions across both our Buy to Let and Residential product ranges. View our product guides.

 

We continue to support customers who are struggling or think they may struggle with their mortgage payments. If you need our assistance, please call our Customer Support team on 0344 257 0427, Monday to Friday, between 9am and 5.30pm. If your client can keep up with their mortgage payments, we would encourage them to do so, as changing their contract could lead to higher payments down the line.

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Mortgage Ready Checklist

Friday, November 3, 2023

Ready, steady, apply?

Demand 10, supply 1

Most things in life work better if you do the groundwork first, and applying for a mortgage is no exception. Yet many would-be homebuyers in Britain are not only ill-prepared, but don’t yet know how to become mortgage ready.

Our new research shows that one in four UK adults has no idea when they might be ready to apply for a mortgage. When asked, our participants knew credit scores, deposits and secure incomes were important. But beyond that basic knowledge, they relied on guesswork. 12% thought it would take them more than a year to prepare for an application, while a further 13% couldn’t say how long they thought it might take.

Better with a broker

One positive statistic from our research was that 11% of people knew they had everything in place, thanks to the support and advice of their broker.

This highlights the valuable role brokers can play in preparing their clients and achieving positive outcomes. It’s also an indication of how you could grow your business - because that statistic leaves 89% who haven’t yet spoken to a broker about becoming mortgage ready.

Mind the gap

Given the prevailing lack of knowledge out there, it’s no surprise that 17% of those surveyed had been rejected for a mortgage, at least once. This underlines the need for clarity and education, particularly in complex cases, or where applicants fail to meet traditional, high-street-lender criteria.

Brokers can do a great deal to bridge the knowledge gap. By helping your clients understand the application process and criteria, you’ll be empowering them to plan their future and achieve their home ownership goals. You should also be able to place more successful cases for your own business.

Introducing our new Mortgage-ready Checklist

We’ve developed a simple, clear checklist on what needs to happen before an applicant can be truly mortgage ready.

It’s based on seven key headings. Take your client through the list, step by step, and you can’t go far wrong.

  1. Proof of identity
    Your client will need photo ID, usually a passport or driver’s licence. Make sure the document is still valid and has all the correct information, including a current address and an up-to-date photograph

  2. Proof of income
    Your client may need proof of income. This will usually mean supplying
    1. the last two months’ payslips for employees
    2. the last two year’s accounts or tax calculations for the self-employed
    3. at least three months’ business bank statements for those who’ve been trading for less than two years
    4. for contractors, a copy of a current contract, plus two months bank statements showing contractor income
  1. Bank statements
    At TML we’re a lot more flexible than most high-street lenders, and we can help when other lenders might not. However, it’s always a good idea to have at least three months bank statements handy (plus business-bank statements for the self-employed). The lender might not ask for them, but it’s wise to have them ready.

  2. Deposit
    Depending on the mortgage loan to value and the lender they apply with, your client will need to save between 5 and 15% to put down as a deposit. Currently the average first-time buyer deposit for the UK is £42,451.

  3. Credit score
    While a specialist lender like TML can work with customers who don’t have great credit scores, a good one will always be a big help. To improve a score, your client should
    1. make sure they’re on the electoral roll at their current address
    2. ensure mail and bills are going to the current address
    3. close any unused bank and credit card accounts (although not all credit card debts need to be cleared)
    4. close any joint accounts where the other party has a poor credit history (although lenders can still insist on a joint application if your spouse has a bad credit history)

Spending habits

Big spenders can damage their chances of being accepted for a mortgage. Some yellow-flag spending habits are gambling, expensive holidays, and luxury items which appear to be beyond the applicant’s means. It doesn’t mean your applicant can’t enjoy a holiday, sensible saving and spending should allow for this, and it shouldn’t impact their lending eligibility.

Monthly expenditure

To work out if your client can afford a mortgage, you should add together council tax, energy bills, insurance, pension contributions, travel costs and any other regular payments, like phone contracts or maintenance payments. Then add a sensible sum for food, drink, clothing, entertainment, and savings. If what’s left can comfortably cover the mortgage repayments, you’re good to go.

Help is out there

Successive UK governments have recognised the difficulties faced by would-be homebuyers, particularly first-timers, and introduced various schemes to help. Some of these have been a mixed blessing, and it’s important to look at the potential disadvantages as well as the good points before you encourage your client to apply.

The Lifetime ISA was introduced to encourage long-term saving. Under the terms of the scheme, the government contributes £1 for every £4 saved, up to £1,000, but the bonus is only payable if the saver puts the funds towards the deposit on their first home, or into a pension. However, there’s a limit of £450,000 on the cost of the home. This could already be a problem in some parts of the country, and with increasing prices it could be of limited value to more and more buyers in the future.

Other options for FTBs include:

-              The Mortgage Guarantee scheme (UK Wide)

-              First Homes scheme (England)

-              Home Ownership for People with Long-Term Disabilities (England)

-              Shared Ownership (England)

-              New Supply Shared Equity scheme (Scotland)

-              Help to Buy (Wales)

-              Homebuy (Wales)

-              Shared Ownership (Wales)

Packaging the perfect case

So you’ve talked your client through our Mortgage-ready Checklist, and you’ve got all your ducks lined up in a row. Time to submit to TML? There could still be a bit of work to do if you’re going to package the case perfectly, which helps us to process your case as quickly as possible.

To make life simple, we’ve produced a checklist - and this one’s just for you, the broker. Go through it before you submit a DIP within our broker portal, for the best chance of a positive outcome. Remember to double check the application before you submit it, and add a note on anything you think we might query.

When you’ve submitted the DIP and it’s been accepted, you’ll be able to submit an application. Our broker portal will tell you exactly what documents you need to upload, and send you an automated reminder. There’s also a video guide on our website We’ll only progress the case to an underwriter once everything’s uploaded, as this allows us to process applications as efficiently as possible for you and your client.

Of course, the team at TML is always ready to help, at any stage of the process. Contact your local BDM or our Hub for support.

Closing the knowledge gap

Our recent research has proven what we already suspected - namely that thousands of potential homebuyers are in need of advice on becoming mortgage ready. That’s where you - the supportive, proactive broker - can make all the difference by closing the knowledge gap.

Using our Mortgage-ready Checklist, as well as our calculators and other supporting material, you can give your clients the best possible chance of securing a fair, good-value mortgage offer. And if you need support at any stage, you can always contact us at TML.

Give us a call with your next case.

Please note article content was accurate at time of publishing