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What documents will you need to apply for a mortgage?
When people apply for a mortgage there can be some confusion over which documents they will need to supply to the lender in order to get a mortgage offer approved. To help you understand what may be required we have listed the main types of documentation needed when apply for a mortgage with impaired credit.
Application form and other lender documents
This goes without saying but in order to be complete we thought we should list it first. Along with a mortgage application form you will also need to complete the lenders direct debit mandate and if the mortgage is placed through a mortgage packager you may also need to complete a lender supplementary declaration form.
Identification
This is simply to prove you are who you say you are, acceptable identification are typically things like your passport or driving licence.
Proof of residence
Proof of residence along with identification will be used to help prevent money laundering and satisfy the lenders criteria that you live where you say you live. Typically lenders will require three years proof of residence. Even if you are on the voters roll where you live it is likely the lender will still want supporting documentation for the current year - suitable documentation are typically utility bills, council tax bill etc.
Wage Slips
If you are employed and applying for a mortgage they will also require wage slips, at least the last 3 months. If you are unable to supply wage slips (maybe you have lost them) the lender can apply directly to your employer for an employers reference. The wage slips will prove you work where you say you work and earn what you are stating you earn.
Accounts
If you are self employed and have a certified accountant the lender will require at least you last 12 months trading accounts or an accounts reference to proof you are self employed and are earning what you state on the application.
Self Cert
If you are self employed and are unable to provide accounts (perhaps you do self assessment or your accountant is not certified) then you will need to apply for a self cert mortgage. Contrary to popular believe self cert mortgages do not allow you to simply state your income on the application form without any checks being carried out. The lender will want some proof of self employment (a letter from the Inland Revenue for example) or some other form of proof but gone are the days when simply stating an income will be sufficient. Although the lender will not check your income directly, they will make sure you are self employed and if your income is over a set amount (set by the mortgage lender) usually about £50,000 the lender will insist on some proof of income - so whilst self cert is useful for the self employed, the lender will still need some supporting documentation .
Mortgage Statement
The lender will normally get any information regarding your current mortgage payment history from your credit file. However if there are any discrepancies about payment history or you have missed mortgage payments (or secured loan payments) the lender may request a 12 months mortgage statement from your existing lender. It may also be the case that whilst there are no discrepancies your mortgage payment profile simply is not listed on the credit file, in this case the lender will also request a 12 months mortgage statement.
Debt Management
The mortgage lender will also use your credit file to work out affordability regarding existing none mortgaged finance. They will normally work this of the information on the credit file. However if you are on a debt management plan the payments to your unsecured creditors will differ to that listed on your credit file, with that in mind the lender will normally accept the monthly payments being made through a debt management company instead of those mentioned on the credit file which can help with mortgage affordability. If you are on a debt management plan the lender will also want a debt management statement detailing who the monies are owed to, the amounts owed and the new monthly payments being made through the debt management company.
Mortgage Arrears and Bad Credit
If you have mortgage arrears and possibly bad credit listed on your credit file then it is very likely the lender will want a signed letter from yourself detailing the circumstances of how the arrears etc came about. They will want to ensure your new mortgage will be affordable and a reasonable explanation as to how any existing mortgage arrears came about should help the lender underwriter determine whether an missed payments on the new mortgage would be likely.
We hope this sheds some light on the documentation needed when applying for a mortgage and what that documentation would be used for. We can obviously not cover all circumstances here and the lender may request other documents depending on your individual circumstances but the ones listed above should apply to most people applying for a mortgage with adverse credit.
