Based on 12 years of experience, and hundreds of submitted applications, I can quite confidently tell you that there are a number of documents that a lender will usually request to support a residential mortgage application. If you’re planning to arrange a mortgage to buy a new home, or you want to a remortgage to take advantage of some of the low interest rates that are currently being offered, I suggest that you should have the following items available so that your Mortgage Adviser can make copies:
Evidence of Identity & Address
Because evidence of ID needs to include your full name and date of birth, (and because there’s a photo) the documents taken are usually a copy of your current and valid passport, or a valid driving licence. If the paper driving licence is supported by a photocard, then copies of both of these will be needed.
If you don’t drive, and don’t have a valid passport, then you could supply a firearms certifcate or shotgun licence, National ID card, or some other government issued document that includes name and address (council tax bill for example) This will need to be supported by another document issued by government or public sector department, regulated utility company, FSA regulated company (bank or buidling society) or judiciary.
Proof of current address is pretty easy for most people to supply. The document will need to be dated within the last 3 months, and show name, address, details of issuer, and date of issue. Examples would be bank / credit card statements, utility bill, benefits confirmation letter, or council tax bill. As above, the doocument should have been issued by government or public sector department, regulated utility company, FSA regulated company (bank or buidling society) or judiciary… There are exceptions to the ‘within 3 months’ rule, such as a council tax bill that’s issued annually.
Why provide these things? Your adviser and / or bank, will need to show verification that you are who you say, and that you live where you live. The primary aims of requesting this information are to reduce instances of money laundering, and fraudulent activity
Evidence of earnings
If you are an employee, then it’s likely that you will be asked to provide copies of your most recent P60 and 3 months of payslips. The mortgage company will need to see assurance of sufficient income to meet the monthly mortgage payments. Payslips will show a breakdown of income, basic income, overtime, call-out, car allowance etc.
This blog entry was in fact inspired by a client who asked me this morning “Why is it necessary to supply the P60 as well as payslips that show my salary?” .. Good question!
The primary reason being, to see persistency of income throughout a full year, and to get a full picture of earnings that might include additional payments received for overtime / bonuses. It could highlight occupations that have seasonal variations of income. Finally a P60 will also include additional, and verifiable information (including the employers name and address, and tax office and reference numbers) that could further assist with the fight against money laundering and fraud.
For self employed people, or for company directors, you will probably be asked to supply accounts for 2 or 3 years, plus an SA302. Once again, the aim is to evidence persistency / consistency of earnings, plus obtain verifiable information such as tax details, and accountants information.
If you receive any additional income from other sources such as child benefit, tax credits, rented properties, investment income, or pension payments, then it’s likely that these will need to be evidenced too. All of these will generate paperwork such as statements, entitlement confirmation letters, or tenancy agreements, which could be asked for.
A bank statement can supply quite a few items of useful information, and could also be seen to show spending behaviours / affordability / attitude to credit. If, as is common, 3 months of statements are requested then the underwriter might check .. Do salary credits match the payslips? Does the address match other documents / info supplied? Does the person operate within overdraft limits? Are there deductions for ongoing commitments that have not been declared within the application form? Can payments from additional income be seen?
Proof of deposit
To make it more difficult to use properties / mortgages to assist, and to deter money laundering or fraudulent behaviours, it is becoming increasingly ‘the norm’ for lenders to request evidence of deposit sources:
- If you are using a parental gift, the lender may require a letter from your family member. Your adviser will be able to tell you what’s needed and why.
- The deposit may be from savings, in which case you’ll need a statement from your bank / building society that shows your name, address, account number, bank logo, balance of the account, and preferably transactions that show the amount of savings building over a period of time.
- One of the most common sources of deposit is sale of another house. In which case, your lender may request a letter from the solicitor who is dealing with that sale, confirming the address of that property and the amount of equity (deposit) that will be released and available following completion.
Of course the list above is not exhaustive, and there are other documents that could be (and are) requested. These items are the most common though, and worth having on standby (if possible) before a meeting with your Adviser. Surely it’s better to find the above items calmly, and at a convenient time, rather than scrabbling around and searching the house when the information’s needed .. As i was constantly reminded as a young lad in the cub scouts ‘be prepared’.
Article was originally posted elsewhere (movingex.blog.co.uk 2012-05-28 – 12:37:57) Content remains relevant, which is why I have added it here. Tips based on observations made both whilst working inside estate agency offices, assisting clients to purchase, and of course purchasing properties myself.