Final checks before mortgage offer (top 3)
In this brief blog, we are going to discuss the final checks before a mortgage offer may be given.
There are various checks a mortgage lender may carry out before giving you a mortgage offer, they include:
What are the final checks before a mortgage offer?
A mortgage lender may carry out a variety of checks before they offer a mortgage, some of these final checks include:
Internal lending checks
A mortgage lender may carry out internal checks to ensure you are not on their banned list or you have a current mortgage balance outstanding by the lender or anyone in their group and hence reached their lending limit per borrower.
A mortgage lender may carry out a final identity check to ensure your identity is the actual identity which you have given. This may involve carrying out a variety of third party checks using various software and databases.
These identity checks may also involve checks carried out on anti-money laundering, fraud or similar databases to ensure you are not an individual which the mortgage lender should not be lending to.
Some of these databases include the CIFAS database, the national fraud database etc
Another final check which a mortgage lender may do before giving you a mortgage offer will be to check and see if you are currently bankrupt or have ever been bankrupt by checking the bankruptcy register.
Income verification check
Another final check which a mortgage lender may conduct before they offer you a mortgage is to check on your current income in order to ensure it is accurate and you can afford the mortgage you are seeking.
A mortgage lender may do this by checking the data on the payslips which you previously submitted but they may also crosscheck this by checking your banking transactions using open banking or your bank statements.
A Hard credit check
A mortgage lender may also carry out a final Hard credit check to ensure that your creditworthiness has not changed since you submitted your mortgage application.
If your credit score or history has changed due to bad credit behaviour such as the below then you may find it very hard to get a mortgage.
Bad credit includes:
- Individual voluntary arrangements
- Missed credit repayments
- Late credit repayments
- Country court judgement
- Home repossession
- Debt management plans
Mortgage deposit check
Another final check which a mortgage lender may carry out before providing you with a mortgage offer includes checking to see if the mortgage deposit you stated remains the same and if you have proof that the mortgage deposit is in your possession at this time
A mortgage lender may also check to see if the source of the mortgage deposit can be established to prevent money laundering or any fraudulent activity.
Property valuation check
Although not primarily a final check, a property valuation check is something a mortgage lender may do before providing you with a mortgage offer.
If the property valuation check indicates that the property is overvalued then A mortgage lender may not present you with a mortgage offer.
Use a Government scheme
Government schemes help you reduce the amount of mortgage deposit you may need to put down, reduce the price of the property or create a structure that increases your mortgage affordability much sooner than it would have been.
Some of these include first-time buyer government schemes whilst others in this list are accessible to you even if you are not a first-time buyer.
Government schemes are not available to you if you are getting a buy to let mortgage.
The Government schemes include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save a maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy– allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire– similar to the above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
Other change of circumstances
A mortgage lender may also come back to you to ask some final questions on if you have had any significant change of circumstances since you submitted your mortgage application.
These could include expecting a child, losing your job or similar circumstances which may affect your ability to afford a mortgage.
Use a mortgage broker for your mortgage in principle
You may want to use an independent mortgage broker to help you get a mortgage on your new home.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.
This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.
It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.
They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.
This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.
FAQs: Final checks before mortgage offer
Some of the most frequently asked questions in regards to the final checks A mortgage lender carries out before producing a mortgage offer.
Can a mortgage lender withdraw a mortgage offer?
Yes, a mortgage lender can withdraw a mortgage offer if they feel the mortgage offer was made in error or if you have had a change of circumstances before completion.
Will A mortgage lender do another credit check before completion?
A mortgage lender may carry out another credit check before completion to ensure that you have not had any severe change in circumstances which may affect your ability to pay back your mortgage.
Can a mortgage be declined after offer?
Yes, a mortgage can be declined after offer if the mortgage lender discovers anything which may affect your ability to keep up your monthly mortgage repayments.
In this brief blog, we are going to discuss the final checks before a mortgage offer.
If you have any questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.