What to expect from the process, and how to get yourself ready to buy
Whether you’re a first-time buyer or climbing your way up the ladder, there is a dazzling array of mortgages on the market for you to choose from.
Banks and building societies will provide lists as long as your arm of loan types, with or without upfront fees, trackers, or fixed for two, three, or even ten years. That’s not to mention deciding your deposit amount and what that will mean for your monthly repayments. You’ll even have to know when you’ll retire so you can work out how long you can borrow for. All of this can make the process feel overwhelming. Considering it’s the biggest purchase you’re likely to have ever made, a little advice can go a long way.
Fear not, we’ve pulled together seven simple tips for making sure buying your new home is as easy as possible.
Check out your credit rating
Before you even think of getting started, you should know exactly what your credit standing looks like. You can order your statutory credit history from any of the main credit check agencies for as little as £2. This can take a little time, so if you’re in a hurry, you might want to use Checkmyfile.com
You can find free reports on sites like Credit Karma, too. All agencies use differing criteria, so you’re likely to see different scores depending on who you ask. Scores are sometimes a little misleading anyway, as there’s no absolute way of measuring your creditworthiness. For example, if you’ve never had any debt that doesn’t automatically mean you’ll have a high score. Lenders like to see that you’ve been able to pay back a credit card or loan, so no credit history can mean they are more cautious with you. If your report does flag anything negative, then it’s a good idea to resolve these issues before you start looking at mortgage applications.
Applying for a mortgage
You need to read about what you can afford. Banks will grant mortgages of about three to five times your average annual earnings plus deposit but borrowing the maximum will mean higher monthly payments. It’s also going to be heavily impacted by the interest rates at the time. Interest can make up around half of your monthly payments back to the bank!
You’ll also have the mortgage fees to consider as well; some banks tag this onto the total debt you borrow, whilst others need the fee upfront. A Mortgage Broker can help you at this point by pointing you towards the best mortgage offer for you and will also help you to complete all the paperwork. This is important because a rejected application can reflect badly. A good mortgage broker can significantly reduce the risk of your application being rejected. They can also give you a breakdown of your options and help you work out exactly what you can afford, and how best to pay for it.
Finding your home
Once you have worked out what you can afford, you or your mortgage advisor can put in the application for something called an ‘Agreement in Principle’. This is the bank's way of saying that they are happy to lend you a certain amount of money if the property meets all their requirements (more on this later!). It’s the bit of paper you need to put an offer in to secure your new home. Now it’s the fun part! House viewings every weekend for the foreseeable future. Then, wham, you walk in somewhere and you just know. It’s at this point it’s time to engage a conveyancer or solicitor to review the planned purchase and progress the legal elements of getting into your new home. Estate Agents will often suggest their solicitor to ‘speed things up’. Take advice like this with a pinch of salt; take a recommendation from a friend or ask your mortgage advisor for more impartial advice.
Get ready to start spending (ouch)
The bank will probably request a preliminary home examination to check the property measures up in terms of valuation. This can be useful, as faults detected during this process can allow you to renegotiate with the seller. You may also want to conduct your own survey from an accredited surveyor. There are various ‘levels’ of a survey with differing costs, so it’s worth doing a bit of research. If the value of the property is higher than the maximum offer from the bank, you will need to find another source of funding that will cover the price difference.
Show me the money!
When your purchase offer is accepted by the seller and the bank agrees to the loan requested, your mortgage broker will submit a full mortgage application on your behalf for a specific, valued property. The bank will once again check your income, marital status and residence permit in the British Isles. You may need payslips from the last three months, and for self-employment folk, SA302s from the last three years and a Tax Overview (or Company Accounts, if you are the owner of a limited company). You may also need to prove you have the deposit! The entire application process may take several weeks. If it is positive, you could receive a loan offer, which is normally valid for three to six months - depending on which bank you apply for.
The Legal Bit
Buyer and seller solicitors deal with the preparation of the final transaction and the relevant content of the contracts. Your solicitor will have the task of making sure the purchase (and sale if you're selling your current home) is legally watertight, and that any disputes are resolved. They will also deal with stamp duty on your behalf and try to get any funding if you are entitled to it. They will get you through the exchange of contracts and completion processes. All details about the transaction are included in the contract, which is a voluntary commitment of both parties. Breaking it may result in serious consequences, including litigation or loss of deposit. Again, this is why it’s worth having people who have good knowledge of the process on your side.
Moving day
Hello, homeowner! The day when you finally become the full owner of the property is called the completion date. On this day, the bank or other financial institution granting the loan will pay the entire amount into the seller's account. Your solicitor will then register you in the Land Registry as the official owner of the property and hand over the house keys to you. From that moment, the provisions contained in the contract become legal. Welcome home!
You should always be prepared for additional costs depending on the amount of the transaction and bank fees, as well as with taxes, such as Stamp Duty. The help of a proven solicitor and a good mortgage broker, however, can make all the difference to how smoothly your purchase goes. Try not to feel pressured by the sellers or take things personally. It’s a business transaction at the end of the day, and everyone is trying to get the best deal for themselves!
You can find out more about getting the right mortgage advice here [LINK].
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