This will usually depend on two factors.

 

Firstly, your annual earnings total. Mortgage lenders have different policies but they usually apply a multiple on your annual income of between 3 and 4 times (although in this heated market, it can go up to 5 times). If it is a joint application they look at the combined annual earnings and apply a multiple typically around 2.5 times.

 

Other lenders use more advanced credit models that take into account your expenditure as well as your earnings. You may have to fill in a detailed questionnaire that details your outgoings. Obviously if you have 5 children you are going to have less disposable income than someone earning the same with no dependents.

They are essentially checking out the affordability of the loan, something you should have already considered when making the application.

 

Secondly, the value of the property.

 

Many mortgage lenders will grant a mortgage of up to 85% of the value (as assessed by the lender's own valuers) of the property. This loan-to-value ration can go up to 95%. Beyond this, up to 110% is possible, but at a higher cost.

 

If the lender's valuers think that the property is overpriced for the area, they may either refuse the loan or they may offer a mortgage at a lower loan-to-value ratio.

 

The normal length of a mortgage term is 25 years. Although this is the traditional length, mortgages can be granted for other terms, i.e. 15 or 20 years. Obviously the attraction is the shorter the term, the less interest will need to be paid.

Based on the initial information you give to the mortgage lender, they may well say 'yes, in principle we will grant you a mortgage'. I.e. it is a conditional loan offer.

 

You can then confidently look at prospective properties and go as far as making an offer, knowing that you have a high chance of obtaining the mortgage necessary for purchase. Of course once you get to that stage the lender will want to see documetary proof of your initial statements i.e. relating to your income etc.

 

So it is as it states, a 'mortgage in principle'. Armed with this, estate agents and vendors will have more faith in you and you shouldn't be perceived as a timewaster. You may well be dealt with more favourably than any others competing to buy your chosen property who do not have finance in place.

 

 

If you are in employment, you will be asked for written proof of your pay for the last 12 to 24 months. Typically, this will be your payslips and P60. Your employers will also be contacted for verification.

 

If you work for yourself or are a company director the market is a lot easier now there are specialised mortgage products for this area offered by most major mortgage lenders. They normally ask to see your accounts for the last 3 years (preferably audited).

Failing that, a letter from your accountant confirming your income will usually suffice where your business has not been running for a long period.

 

Self-certified (self-cert) mortgage products are now also available where you just need to state what your income is without having to provide proof. Often the interest rates are a little higher and the loan-to-value ratio is not usually higher than 80%.

Usually any lies will be found out by the lender. They have ways of cross-checking information. Lies about things like credit history are very easy to verify. Your application will be refused. Worse, your prospects of getting another mortgage in the future from that lender or other lenders (they share information in these cases) will be massively reduced. Best to be honest from the start.

Obviously it is not going to be as straightforward as for someone with a sparkling credit history, but it is not at all impossible. A quarter of adults in the UK have had bad credit at some point. More than 2 million people have fallen behind with their mortgage payments. These days, most of these people would not be precluded from being offered a mortgage.

 

In fact the MCCB (Mortgage Code Compliance Board) are encouraging larger mortgage lenders to allow people with adverse credit to have a decent chance of obtaining a mortgage.

 

If you have a CCJ (County Court Judgment) recorded against you might mean that it is difficult to get a mortgage from the bigger High Street lenders. However there are specialist mortgage companies who are happy to provide people with adverse credit problems such as CCJs with mortgage opportunities.

Some lenders promote mortgage products that have a low introductory rate for a fixed period of time, often two or three years. After this period the rate reverts back to normal.

 

Obviously they don't really want you to leave them and defect to another lender before they have had a chance to earn much out of your business.

 

So they insert a redemption penalty clause in your contract saying that if you do exit the arrangement during this introductory period, you will be liable to pay a charge. Always make sure you ask the lender about redemption penalties and double-check your contract before you sign, as sometimes they hide it deep in the small print.