The 3 P’s of the mortgage application
The actual process of receiving a mortgage offer is quite simple. It hinges around three key points. As long as you get the tick at all 3 stages there should be no reason not to get your mortgage approved.
The stages or “P”s are simply – Person, Property and Proposition
The first to remember is that a cross on any of the ‘P’s will mean a decline.
Person
This is based firstly on your credit score from your credit file. Your credit score is a function of any number of bits of information about your previous and current financial history. Each of the bits of information is given a weighting to come up with your credit score. This is then used to make a decision. It may be “Approved”, “Referred” or “Declined” at this point. This stage is a computer based decision.
If you are “referred” it simply means that your application has to go to a real person in order to be approved. Referred is nothing to worry about. Unless you have a premium credit score or are perhaps known to the funder you are likely to get referred.
A decline at this point is a bad thing and in all honesty will mean you need to take a serious look at your credit file. There is obviously something seriously wrong with it.
Property
The biggest determinant to the success of this aspect is the property survey or valuation. In the case of a Buy to Let investment the survey has two vital pieces of information that will make or break the deal – the property valuation and the rental valuation. In the case of a residential home it all rests on one thing only – the property valuation.
OK, so I am not going to go into more detail than to say as long as you get ticks on both the property valuation and the rental valuation you are almost there.
The final thing is all of the other variables and comments on the report. The trick to this is to consider what a lender would consider a good risk. Anything that may prohibit a quick sale will be viewed negatively.
Proposition
The final step is the proposition. This comes down to the lending criteria of the funder. There are so many criteria each lender has for their products; in fact they all supply a booklet for each product.
Now assuming your credit file and valuation are fine the Underwriter will check your supporting documents. This is the point at which they will raise queries which must be answered prior to the final formal mortgage offer. With all their queries answered, nothing should stop you from your mortgage offer.
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Lending Prudently
At the end of the day getting your mortgage comes down to one final all important concept of prudence. Simply put, is the funder lending prudently?
As long as the funder can stand up in court if they have to repossess your property and be seen to have lent prudently they are likely to approve your mortgage. Think of it this way, if a lender gives a person with no money and no job a mortgage and after 2 months the person stops paying the mortgage. The bank attempts to repossess the property and the person takes the bank to court. In court the bank may run into problems because as the man rightly says How could you expect me to make payments on time when I have no job and no money?
The funders are very aware of this possibility and take many precautions prior to completion to ensure you ability and commitment to repay the amount borrowed.
Live with passion,
Brett Alegre-Wood
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