Getting a mortgage offer is a big step on the way to buying a home. Here’s everything you need to know about the mortgage offer process
If you’ve got a mortgage offer, you’re well on your way to unlocking the door of your fabulous new home. But what happens next?
This guide answers all your questions about the house buying process once your mortgage offer’s on the table. We’ve also got some great tips if you need a mortgage offer to move forward with your purchase.
A mortgage offer is confirmation that your application for a mortgage has been checked and approved. So you only get a mortgage offer letter once you’ve completed the mortgage application process and provided your lender with all the necessary information about your finances and the property you want to buy. Once you have your mortgage offer, it’s usually valid for three to six months.
To get a confirmed mortgage offer, you’ll have to give your chosen lender information about:
Your financial circumstances – your income, your outgoings, your credit score etc.
The property you want to buy – you’ll need a valuation report showing it’s worth what you plan to pay
Most banks will issue a mortgage offer within a few days of receiving your property valuation report – as long as they have all the other necessary information. As it takes them about five days to receive the report, the time between valuation and mortgage offer is generally around one week.
Prior to finding your new home and applying for a formal mortgage offer, you can also ask for a ‘mortgage in principle’. Usually valid for between 30 and 90 days, this can be approved much more quickly and gives you an idea of how much the lender would be prepared to let you borrow – based on your financial situation. It also shows estate agents and sellers you are serious about buying.
The time it takes to get a mortgage offer usually depends on a range of factors, including the property you’re buying, the lender you choose, and how quickly you provide it with the necessary information. Sending in the relevant paperwork as soon as your lender asks for it should help to speed up the mortgage offer process.
If you’re happy with your mortgage offer, the first step is to accept and sign it (this can often be done online). Your solicitor or conveyancer can then start the final phase of your purchase, which involves agreeing a date to ‘exchange contracts’ with the seller. If you’re buying in England, Wales or Northern Ireland, this is when you legally commit to buying the property.
It’s known as a ‘missive’ in Scotland – where after you’ve exchanged the binding contract neither you or the seller can back out without having to pay a compensation fee.
So if anything has changed since you applied for your mortgage offer, it’s vital to let your lender know before exchanging in case it means your mortgage offer is no longer valid. To complete and get the keys, you’ll also need cash available to cover any deposit, your solicitor’s fees, plus additional costs such as stamp duty.
The time it takes to go from mortgage offer to completion could be anything from five working days to several months or more. It can depend on reasons such as whether your purchase is part of a property chain.
You may be able to secure a higher mortgage offer if the person selling the home you want to buy decides to increase the price due to changing market conditions. It’s up to you to decide whether or not you want to go ahead with the purchase if this happens. If you do, the next step is to contact your mortgage lender to see if it will lend you a higher amount based on the new purchase price.
For this to happen, the bank or building society will have to be convinced the property is worth the new price.
Whether you’re a first-time buyer or a home mover, you can’t get a formal mortgage offer until you find the property you want to buy. That’s because to make a confirmed mortgage offer, mortgage lenders need to check out the house or flat they’re lending against – as well as you. However, you can get a mortgage offer ‘in principle’. This is known as a ‘mortgage in principle’, an ‘agreement in principle’, or sometimes a ‘decision in principle’.
A mortgage in principle is the amount the lender is prepared to lend you based solely on your financial circumstances. It’s valid for between one and three months, and can help you find properties in your price range and show sellers you’re ready to buy. Remember though, that a mortgage offer ‘in principle’ is not a guarantee you’ll be offered a mortgage at that level.
If you’re remortgaging, you’ll still need a mortgage offer from the new lender. This may take less time; if you’re lucky, you could have an offer on the table within two weeks. But the lender will require the same information about your finances and your home.
All mortgage offers last for a fixed time. In most cases this is three months, although it can be up to six months. The clock usually starts once the offer is issued, but some lenders count the days from when you first apply. Others will specify a date by which you must complete on the purchase, so make sure you find out how long your mortgage offer is valid for before signing.
If you’re buying a new-build property, you may be able to get a mortgage offer extension of between three and six months. Banks and building societies may also give mortgage offer extensions to buyers affected by events outside their control.
In an ideal world, you’ll complete the purchase of your new home within one or two weeks of exchanging contracts with the seller. You could do it in less, but most mortgage lenders need five working days to release the funds. Completing your house purchase may also take longer if:
You’re renting a property and can only give notice once you’ve exchanged
You don’t have immediate access to the money you need to pay the deposit or fees such as Stamp Duty
The seller’s onward purchase falls through
Ways to help ensure you complete as quickly as possible therefore include ensuring any cash you need is held in easy-access accounts and giving notice on your rental accommodation before exchanging (although you’ll need somewhere to live if the purchase falls through). As many people feel solicitors cause delays, keeping in regular contact with your solicitor or conveyancer is also a good move.
Mortgage offers are designed to expire after a set time, but you may be able to extend your mortgage offer in certain circumstances. During the Covid-19 pandemic, for example, lenders agreed to help buyers who had exchanged contracts by providing mortgage offer extensions of up to three months.
If you’re buying a new-build property, you may also be allowed to extend your mortgage offer by up to six months if construction is delayed. The terms of a mortgage offer extension could involve:
Extending the mortgage offer as it stands
Delaying the start date of your mortgage deal
Extending your mortgage deal
Your mortgage lender can choose to withdraw your mortgage offer if your circumstances change once the offer is made. Changes that could result in a mortgage offer being withdrawn include:
You losing your job
You becoming unable to work due to ill health
The property losing value
However, it's rare for a mortgage lender to reassess your finances after making the final checks before issuing your mortgage offer. If you’re worried about your mortgage offer being withdrawn, one way to protect yourself is to complete on your purchase as soon as possible after exchanging contracts. That way, you reduce the risk of being contractually obliged to buy a house with no way of paying for it.
But if you’re worried about being able to afford your mortgage repayments, calling off the purchase before exchanging contracts may prove a wiser move.
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