Purchasing a home is a big decision, and one often fraught with peril for the buyer. What kind of home to get, as well as what kind of home a borrower can afford, are the two most important questions a borrower faces. Luckily there are a few things employers can do to help their employees who are applying for a mortgage in the United Kingdom.
In the United Kingdom, the Financial Conduct Authority has taken an active role in mortgage lending ever since the crisis of 2008. Some of the more egregious features of that era of financial chaos included self-certification liar loans and 125 percent mortgages.
One after effect of this change is that the process is longer and the product options available less varied than before. On the upside, the loans are often more affordable, giving the consumer the confidence in knowing they won’t bite off more than they can financially chew.
As you can guess, employer-provided information regarding income and employment status is of critical importance to the process. In this article we discuss some expert advice and information about the kind of paperwork you will need to complete to obtain a mortgage.
Providing proof of borrower income is a normal part of the mortgage application experience. But the questions UK borrowers face are perhaps more invasive than those asked in other countries.
Your employer will help verify at least three months of payslips, your P60, and the borrower will need to provide current bank statements. Questions will include those about gross salary and will involve more complicated affordability calculations for the loan. Smaller lenders, for example, may ask the borrower questions about things like personal grooming expenditures, glasses and eyecare, or cleaning and maintenance on your current residence.
Borrowers both large and small could face challenges, with factors such as pension payments and student tuition loan payments impacting the amount of money a borrower can receive.
Employers can help employees applying for mortgages save time by helping have documentation ready to go when needed. This includes a record of three months of payslips, the employee’s annual P60 form, any bonus payments paid out to the employee, as well as directing the employee to collate three months of bank statements in addition to any pension or investment contributions made.
In addition, employers should advise employees about a few things before the employee begins that mortgage application process. The employee should closely monitor their expenditures for at least six months prior to applying for a mortgage as the above outline scrutiny will rarely go beyond the previous six months. Not only will the previous six bank statements be analyzed for spending habits and income, but also lenders like to see what is called “seasoned” money – that is, liquid assets that have been in a checking account for six months or more. Not only this but maintaining a fairly high average balance will help the mortgage application process.