Applying for a Mortgage: A Step-by-Step Guide

1. Understanding how lenders assess affordability

Before approving a mortgage, lenders must be confident that you can afford the repayments — not just today, but if circumstances change in the future. They’ll look closely at your income, expenses, and financial commitments, and run what’s known as a “stress test.”

This test checks whether you could still afford your mortgage payments if interest rates were to rise over the next five years. It’s designed to protect you (and the lender) from financial strain later on.

2. What to expect during the application process

The mortgage application process usually follows a few key steps:

1. Initial consultation – You’ll discuss your goals, budget, and eligibility with your mortgage adviser.
2. Agreement in Principle (AIP) – The lender runs a soft credit check and gives an estimate of how much you can borrow.
3. Full application – You’ll submit documents such as payslips, bank statements, and proof of deposit.
4. Valuation and underwriting – The lender values the property and reviews your application in detail.
5. Mortgage offer – Once approved, you’ll receive a formal offer confirming the loan amount, rate, and terms.

Your mortgage adviser will guide you through each stage, explaining what’s needed and keeping the process on track.

3. Key factors that affect how much you can borrow

Lenders will look at your income, outgoings, and credit history to determine how much you can afford to borrow. They’ll also consider other factors such as:

• Employment type (salaried, self-employed, or contractor)
• Length of employment and income stability
• Existing debts or financial commitments
• Deposit size and property value
• Credit score and payment history

The stronger your financial profile, the more mortgage options you’ll have access to.

4. The types of costs lenders consider

To build a realistic picture of your affordability, lenders review three main categories of spending:

• Committed expenditure: Payments you’re obligated to make – such as existing loans, credit cards, student loans, child maintenance, or school fees.
• Basic living costs: Your essential monthly expenses, including council tax, utilities, travel to work, insurance, and food.
• Quality of living costs: Discretionary spending such as clothes, entertainment, holidays, and household goods.

By assessing these categories, lenders ensure you can maintain your lifestyle while comfortably meeting your mortgage payments.

5. Preparing your finances before you apply

A few small steps can strengthen your mortgage application:

• Check your credit score and correct any errors
• Pay down existing debts where possible
• Avoid major new credit applications before applying
• Save a larger deposit to access better rates
• Keep your financial records up to date (payslips, P60s, tax returns if self-employed)

6. Documents you need to apply for a mortgage

The mortgage process is quicker and smoother if you prepare your paperwork in advance. Different lenders may ask for additional documents, but you’ll almost always need the following:

Standard documents:

Utility bills (as proof of address)

Proof of any benefits received

P60 form from your employer

Last 3 months of bank statements

Last 3 months of payslips

Passport or driving licence (proof of identity)

Self-employed documents:

2–3 years of accounts, signed off by a qualified accountant

Tax return form SA302

Supporting bank statements for your tax return

Being well-prepared helps lenders process your application faster and improves your chance of securing the best possible deal.