Mortgage Offers – The Ultimate Guide

When you start out on your mortgage journey, the ultimate goal and dream is to obtain that all-important mortgage offer. Going from your initial enquiry to a full mortgage offer can be difficult, not least because there may be unexpected hiccups along the way.

The good news is mortgage offers are not difficult to obtain if you have a mortgage broker who understands the mortgage market entirely. A mortgage broker, like Boon Brokers, can match your personal circumstances and property needs to a lender. This makes getting the mortgage offer much easier as the lender selected will be best suited to your situation.

Let’s explore mortgage offers in detail with our ultimate guide.

What is a Mortgage Offer?

A mortgage offer is simply that, an offer from a lender to provide you with a mortgage. It is a formal offer following a full mortgage application and providing your circumstances remain the same, the offer will stand.

Once you have accepted a mortgage offer you will be able to exchange contracts and complete on your property purchase. Your conveyancers will then arrange for the money to be transferred from your lender to the vendor and you will officially have a mortgage in place.

Steps to Getting a Mortgage Offer

To obtain a mortgage offer there are a number of basic steps you will need to complete.

Factfinding – Basic Mortgage Enquiry

It is best to contact a mortgage broker as soon as possible if you are applying for a mortgage in the near future.

A mortgage broker will complete a detailed questionnaire about your lifestyle, income and expenditure and the type of property you are wishing to buy. You will also need to detail the deposit you have and where this deposit has come from.

Once they have this information, they will advise you of the mortgage product you will need. At Boon Brokers, we have built a bespoke client profile system so you can complete your fact-find on any device at your leisure.

For example, if you are looking to buy a property in order to let it out, the broker will recommend Buy to Let mortgage products. If you are wishing to buy a property to live in yourself, residential mortgage products will be discussed.

Beyond the type of mortgage product you will be directed to, other factors will narrow down the lender best suited to your situation. If you are self-employed, there are more suitable lenders than others when it comes to assessing your income.

You may also have some level of benefit income which some lenders do not accept, and others do.

Finally, the type of property you wish to buy will also be an important factor in determining the success of your mortgage application. Some lenders have extremely strict property criteria whereas others have lenient property guidelines.

Mortgage in Principle

Having identified a specific lender, a mortgage broker will recommend applying for a Mortgage in Principle (sometimes known as an Agreement in Principle or Decision in Principle).

At this point, your broker will approach the lender and provide your fact-find details. How much you wish to borrow and the deposit value you wish to put down may also be requested by the lender.

If this meets the lender’s criteria, they will submit the Mortgage in Principle and a credit check will be run.

Credit Scoring

This credit check is a soft credit check in most cases, which does not impact your credit score. It will still be marked on your credit report but for intents and purposes it has no meaningful impact on your credit profile.

Credit checking is sometimes the place borrowers trip up first as each lender has specific rules about credit-scoring. You should ensure you discuss your credit score with your mortgage broker and, if possible, provide them with a copy of your credit report as it makes the process much smoother.

If you have an adverse, average, or bad credit profile, do not despair. There are lenders who specialise in lending to borrowers with less-than-optimal credit scores.

Difference Between a Mortgage Offer and a Mortgage in Principle

A Mortgage in Principle will be issued providing you have met the lender’s requirements. It is not a guaranteed offer for a mortgage and is instead an indication that they will lend to you providing your income, property type, credit score, etc, can be verified when you make a full application.

Acquiring a Mortgage in Principle is an excellent way of pre-vetting a lender to ascertain how likely they are to lend to you. You will also be able to use the Mortgage in Principle certificate to make offers on properties to purchase. Estate Agents generally need to see a Mortgage in Principle before they can consider an offer from you.

Some estate agents will not allow you to make an offer without a Mortgage in Principle and may request a copy.

Mortgage Application

If you have your offer accepted, you will need to go back to your broker with the property details and proceed to a full mortgage application.

Sometimes at this stage, the property type may mean you need to change lenders from your Mortgage in Principle lender. This is not uncommon as you apply for a mortgage in principle with a rough idea of your desired property and the property you actually find may be different.

When you are ready to proceed to Full Mortgage Application stage, your broker will gather documentation from you and submit the application.

Underwriting Your Mortgage

The evidence you submit will go to a mortgage underwriter who will match the documentation you have provided to the answers you gave in your application.

They will also check for any other discrepancies that may cause them concern. For example, you will need to provide bank statements to your chosen lender and if you use an overdraft this can cause problems.

Overdraft usage is a common area borrowers trip up on. For most people, using an overdraft is an innocuous part of daily life. But for lenders, it can signal you are not able to budget properly and need to borrow money to make ends meet. Overdraft usage is just one of a number of red flags that may results in further underwriting queries from your lender.

Mortgage Valuation

Alongside the evidence verification, a lender will conduct a mortgage valuation. This is a property valuation for the lender’s purposes to ascertain whether the property you wish to buy meets their desired value for the mortgage.

A mortgage valuation is often confused by borrowers for a variety of reasons. Historically, a mortgage lender’s valuation would be a thorough affair with valuers visiting your property in person. These valuers would often look around the property, check fittings and ensure the structure was adequate.

Today, lender’s valuations are much more streamlined processes. Quite often a lender will conduct a desktop valuation and the surveyor will check data available online to determine the value. In rarer cases a surveyor may still visit a property, normally to check an aspect they cannot verify online.

For this reason, a lender’s valuation should not be relied on by borrowers in terms of a property inspection and you should consider arranging your own surveyor to highlight potential problem areas.

Additionally, some lenders will not provide their mortgage valuation report to you, only passing on the headline valuation figure. This means you will be in the dark about what caused a down-valuation, or the steps taken by a lender to arrive at that price.

Finalising the Underwriting Process

The mortgage underwriter will now have a wealth of evidence and data available to them to check that you meet their mortgage standards.

It is very common for underwriters to request more information at this point, especially if there is that last bit of detail required to make a decision.

You will be either declined or accepted after all information has been assessed. If you have been declined, your lender will give you and your broker a brief overview of the reasons for decline but may not elaborate in too much detail.

If you have been declined, your mortgage broker will have a better understanding of your exact circumstances and will seek to place you with a lender who will accept your application.

How Long Does It Take to Get a Mortgage Offer?

Mortgage offers can be received in a matter of days or in some cases over the course of many months. From our experience, mortgage offers are typically issued after 6-12 working days. It is largely dependent on your personal situation and how complicated the mortgage is that you are trying to arrange.

For example, it is common for remortgages to be offered quickly order but purchases of listed or unusual properties may take much longer. This is largely because the valuation process will require far more underwriting time.

Your mortgage broker should be able to give you a rough indication of the timeframe you should expect when you make your mortgage application.

Be aware, even this rough estimate may be considerably wrong if unforeseen problems arise during the underwriting process.

With that said, mortgage underwriters are practiced professionals and always seek to complete underwriting in the fastest possible time. After all, lenders only make money when they have allowed you to borrow money, so it is in their interest to be pro-active on mortgage underwriting.

How Long Does a Mortgage Offer Last?

Mortgage offers typically last for six months. However, this can vary from lender to lender. For example, in the lifetime mortgage market, an offer may only be valid for 2-3 months. All mortgage lenders will confirm the offer expiry date on the offer document.

Most lenders will reserve the right to withdraw a mortgage offer at any time or amend the product they offer you if you have a change in circumstances.

Is a Mortgage Offer Legally Binding?

Yes, a mortgage offer is legally binding to the lender unless their offer conditions are broken. The mortgage becomes legally binding to you as the borrower when you accept the mortgage offer and exchange.

Mortgage offers however are regulated. If you feel you have been unfairly treated or the mortgage offer was not made in line with regulation outlined by the Financial Conduct Authority, you can raise a complaint.

In the first instance a complaint must be raised with the lender and if they fail to give you a satisfactory resolution, you can escalate the complaint to the Financial Ombudsman Service.

Can a Mortgage Offer Be Withdrawn?

Yes, mortgage offers can be withdrawn if a lender’s offer conditions are not met or if there are a change in the applicant’s circumstances. For example, if a mortgage applicant’s income suddenly changes, meaning that their income position no longer fits the lender’s affordability calculation, the lender has the right to withdraw or amend their mortgage offer.

Typically, lenders do not withdraw mortgage offers unless they absolutely have to. Remember a mortgage lender only makes money if a mortgage product is arranged so it is not in their best interest to withdraw mortgage offers unless the risk outweighs the return for them.

If you have had a mortgage offer withdrawn, you should contact your broker in the first instance to query the reason for it. An experienced whole of market broker, like Boon Brokers, can then advise on the best course of action moving forwards.

Speak to a Mortgage Expert

Obtaining a mortgage offer is the ultimate goal for anyone setting out on their mortgage journey. An expert broker streamlines that process and helps you onto the property ladder while reducing the stress and anxiety.

Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Broker. Boon Brokers offers fee free mortgage advice.

Contact Boon Brokers to discuss getting a mortgage offer today.