Here’s what you need to know about the mortgage and home-buying process and the steps you need to take before you can pick up the keys to your new property.
Work out your budget
The first thing you need to do before applying for a mortgage is to work out your budget. Remember that you’ll need to have savings available for your deposit and stamp duty, as well as your conveyancing costs and, where applicable, mortgage arrangement fees. Don’t forget that lenders will want to check that you can not only afford your mortgage payments now, but that you would also be able to cope financially with higher payments if interest rates rise in the future.
Get a ‘decision in principle’
If you want to prove to estate agents and sellers that you are serious about buying, it can be a good idea to get what is known as a ‘decision in principle’ before you start your property search. This is basically a statement showing how much they may provisionally be prepared to lend you once you’ve found a property you want to buy.
Before offering you a decision in principle, lenders will want to know how much you earn, and how big a deposit you have available. They will also want to find out about how you’ve managed debts in the past, so they will contact a credit reference agency such as Experian, Equifax or CallCredit to get a copy of your credit report.
Bear in mind that a decision in principle isn’t a guarantee that your mortgage application will be accepted. Your lender will want to see lots more information when you apply, so start gathering together all the paperwork you’ll need, such as payslips as proof of income and utility bills and photo ID such as your passport and driving licence, as this will help speed up the process once you’ve found a property you want to buy.
Getting the best mortgage deal
Once you’ve found a property and your offer has been accepted, you will need to seek advice on the best mortgage deal at this point. Remember that mortgage deals are constantly changing, so a rate which might have looked good a couple of months ago may have been replaced by a better deal.
A mortgage broker will be able to research the market on your behalf and recommend the best deal to suit your individual circumstances. You will then need to fill in a full mortgage application form. Your mortgage broker will help you submit that and you’ll need to provide the lender with all the necessary paperwork.
Valuations and surveys
When the lender has confirmed that they have all the information they need, and you have passed all the required credit checks, they will then want to arrange a valuation of the property you are buying. This is conducted by a surveyor whose job is to let the lender know how much the property is worth, so that they can be certain you aren’t over-paying.
Valuations don’t usually happen immediately, so you may need to be prepared for a bit of a wait while the surveyor arranges a time when they can gain access to the property. Remember too that a valuation is not the same as a survey, and it will only give you a guide as to whether the price of the property is fair, and not whether it is structurally sound.
It’s therefore usually a good idea to arrange a more in-depth survey for you, not just the lender. Even though you will usually have to pay a few hundred pounds more for this, it may prove a worthwhile investment if it uncovers any major problems with the property you are buying.
If the lender is happy with the valuation, they will then provide you with a firm mortgage offer. It can take as much as four weeks from submitting your mortgage application to having it approved, but it could be quicker than this if you have all the information the lender needs to hand.
Your solicitor may have already started the legal work to make sure that the sale can proceed. This will involve them conducting searches on your behalf to make sure that there aren’t any potential issues which could affect the value of the property going forward. They’ll get information on the property and fittings and contents from the seller and raise any queries you might have before contracts are signed.
Once all the necessary documents have been obtained, contracts can be exchanged and a completion date can be set, which is typically a week or two after exchanging. At exchange the purchase becomes legally binding, and neither you nor the seller can back out.
Exchange can happen in just a few weeks if, for example the property is a new build, or there’s no chain, but it may take much longer than this, sometimes several months, from the point you first made an offer.
