Topics
Initial Contact Questions
When applying for a mortgage, you need to first make initial contact with your potential lender. This initial meeting gives lenders a chance to ask basic financial and income questions to gain a general overview of your financial standing.
Obviously, nothing final can be determined here. However, a ‘mortgage in principle’ may be offered to you. This means that you will be approved for a mortgage from this lender should you pass all their checks and other requirements.
You can expect the following topics to be covered during this stage:
Personal details and contact information
Lenders will ask what your personal details are, what your phone and e-mail address are, and what your address is. When it comes to verifying this, you’ll need proof of address and either your passport or driving license (as long as it has your current address on it).
What are your employment details?
The lender will ask what your current employment status is, where you work, and how long you’ve worked. You must also explain previous employment details and account for any recent gaps in your employment history.
If you work part-time, freelance, or are self-employed, you’ll also have to make this clear here.
What are your income details?
As a follow-up question to the employment enquiries, you’ll be asked how much money you make from your current position.
What are your financial commitments?
Here, you’ll be asked to give an overview of your current debts, your family situation, and how much money you spend on rent or other property payments.
Credit history overview
If you’ve already checked your credit score, you could give the lender an idea of what your current score is.
Should it pertain to you, it’s important to be honest about previous debts, bankruptcies, credit applications, and other negative financial situations that will be recorded on your credit score.
Affordability Assessment Questions
Once you pass the initial contact meeting and are offered a mortgage in principle, you’ll be asked more in-depth questions and have to provide documentation to support your answers.
Specifically, you’ll be asked questions to assess how able you are to afford the loan. These questions include:
How much money do you make?
Your annual income needs to be assessed to determine whether or not you can actually afford to pay off the loan. You need to be as upfront as possible so that lenders can judge you accurately.
You’ll also have to detail where you work and prove it with supporting documents.
To prove how much you earn, you’ll need to provide bank statements, tax returns, and employer contact details. If you earn additional money through bonuses, second jobs, or child support, you need to detail and prove these as well.
If you’re applying for a joint mortgage, you and your partner’s income will be calculated together.
Also, if you’re self-employed, you’ll have to supply additional documentation to prove your income and financial standing. This includes 2+ years of certified accounts and your SA302 forms.
What do you spend your money on?
Mortgage lenders need to know what you spend your money on to further assess whether you can afford to keep up with mortgage monthly payments.
The bank statements you provide will also tell mortgage lenders exactly what you spend your money on each month. Here, you should highlight how much you pay in rent and how much you spend on food shopping on average. You should also explain monthly subscriptions and hobbies you regularly pay for – basically, anything that requires you to make a regular payment.
Do you currently have children?
An extension on the “how you spend your money question”, lenders need to know if you currently support any children. Obviously, children are expensive to support and some parents struggle to make mortgage repayments because of it. The amount of money you spend on your child needs to be factored in.
How much debt do you have?
Here, you’ll have to detail any recurring debts you have or are currently paying off.
If you’ve already used most of your overdraft or are close to your credit limit, lenders will question if you’re financially responsible enough to take on a mortgage.
Sometimes, having debt can improve your chances of getting a loan. If you’re responsibly paying off any other loans on time each month, it proves you’re responsible with credit. This may encourage the lender to approve your loan application.
Property and Loan Details Questions
Mortgage deals can be made or broken based on the type of property you’re looking to buy. Lenders can be very picky with the type of property they grant mortgages for.
What type of property is this for?
You need to state whether you’re buying the property for residential or buy-to-let purposes.
A description of the house will also be required. This description needs to detail if the house is an old or new building and whether the house is made from brick and mortar or another building material. Stating the location of the house, whether or not it needs renovation, or whether or not it is at risk of flooding is also essential.
You also need to prove your home purchase agreement, which will detail the terms of your offer for the house as well as other information about the house you’re buying.
What is the value of the property you’re looking to buy?
The lender will carry out their own property valuation, but you’ll have to prove how much the property is currently valued at to give the lender an idea. This will help the lender calculate your loan-to-value (LTV) ratio.
Credit and Finances Questions
Your credit history also determines your ability to take out a home loan. If you’ve had problems paying back credit in the past, your application may not be accepted.
What is your credit history?
In response to this, you’ll need to detail your credit history. The lender will be running a credit check anyway, so it’s important to be truthful and to conceal nothing.
Whether or not you’ve ever taken out a payday loan will be evident by your credit score and history. Payday loans aren’t necessarily a bad thing, but if you’ve taken out a lot of them and been late in repaying them, mortgage lenders are going to ask questions.
Where is your source deposit from?
You need to explain where you acquired your down payment from. For example, you need to prove that you saved up, inherited, or were gifted the down payment amount.
You’ll then have to submit supporting documents, such as a bank statement proving that you have a deposit saved. If relevant, you’ll also have to submit a down payment gift letter.
Future Financial Stability and Mortgage Stability Questions
Lastly, lenders will ask questions that look to your future. This will further confirm whether or not you’ll be able to keep up with monthly repayments.
Do you have savings or other assets?
You’ll be asked to confirm whether you have any other savings or assets that are not included in your down payment. If you have a significant amount of other savings, it could strengthen your mortgage application. It helps the lender better understand your overall financial situation.
Are you planning on having children in the future?
Being honest about future plans to start a family will also help lenders understand your ability to repay the mortgage.
FAQs
What questions will a mortgage provider never ask?
Upon applying for a mortgage, the lender will never ask anything related to your sexual orientation, religious beliefs, or political views.
What should you never tell a mortgage provider?
You should be as honest as possible with your loan officer. They’ll be running a credit check on you anyway, so there’s no point trying to hide any of your financial past from them.
Final Thoughts
When applying for a mortgage, be prepared to answer plenty of questions – from information on your leisure activities to the source of your deposit. It’s important to be honest and provide documentation to back your answers up. If you meet the lender’s expectations, you’ll get a good mortgage with a low interest rate.
Additional Sources:
https://www.onlinemortgageadvisor.co.uk/blog/eight-questions-your-mortgage-lender-will-ask-and-why/
https://www.bankrate.com/mortgages/questions-to-expect-from-lenders/#questions-to-expect