Let’s face it, getting a mortgage can seem like a very daunting process, especially if you’re buying your first home. It should be an exciting time for you though, as you plan for all the things you’re going to do to your new property.
The mortgage process is just like any other; there are steps you need to follow and if you do this efficiently then you’ll stand the best chance of completing it as quickly and painlessly as possible. To help you get to grips with the main things you need to tackle, we’ve put together this handy guide which helps to explain the mortgage process.
When should I apply for a mortgage?
Buying a house can seem like a complicated business from the off. You can’t buy your new home without getting a mortgage, but you can’t get a mortgage until you’re ready to buy the house. It’s a lot like the classic conundrum of what came first, the chicken or the egg?
Our advice here is to start organising your mortgage before you start seriously looking at properties. If you find your dream home without beginning the application for a mortgage, the amount of time it usually takes can easily mean that the property disappears before you’re ready to move.
There are other reasons for starting your mortgage application before you get carried away with your house hunting. Firstly, you’ll find out how much you can borrow, so you’ll know what your budget is when it comes to how much you’re going to spend on your home. This can be very useful if your financial situation’s not entirely straightforward, for example if you’re self-employed or you’ve recently set up your own business.
Getting ahead with your mortgage can also give you an edge over other potential buyers. If you have rivals for the property you’re interested in, your case will usually be helped if you’re further down the line with having your finances in order.
Another reason to get stuck into the mortgage process nice and early is to avoid any potential hiccups once you’re more involved in the buying process. A crucial part of buying a new home is to keep surprises to a minimum and deal with any issues as soon as possible, helping your experience go as smoothly as it can.
When choosing a mortgage, it’s always a good idea to seek independent advice. You should look for an FCA registered mortgage broker or financial adviser to lead you through the process.
Mortgage Agreement in Principle
If you’re looking for your home buying experience to go smoothly, it’s important to get a mortgage Agreement in Principle (AIP). Having an Agreement in Principle from a lender will show any seller that you’re serious and ready to buy. This will potentially give you the edge if there are competing offers, and could also give you some extra clout when it comes to negotiating the sale price.
With your budget set by your AIP, you’ll be able to focus on houses within your price range. This will stop you from wasting time looking at unrealistic targets, and avoid disappointment if you go to a lender after finding a property you love, only to be restricted on your limit. An AIP is usually quick to get, and lenders will look at your credit score and credit history to determine how much they’re willing to give you. It’s important to keep in mind what is affordable individually, and just because a lender will give you a particular amount doesn’t mean the monthly payments won’t stretch your budget too far.
Happy house hunting
With your pre-approval in the bag and your budget set, it’s time to ramp up your house hunting. If you put too much pressure on your hunt for the perfect home, things can become very stressful and you’ll be more likely to make the wrong decision. There are lots of houses out there, so don’t pin everything on just one property, and enjoy the search.
Mortgage application and loan processing
When you’re ready to turn your interest in a property into something more concrete, it’s time to make an offer. If this is accepted, then you can proceed with turning your pre-approval into a solid mortgage offer. To do this you need to complete a full mortgage application.
If you’ve already got an agreement in principle in place, you’ll have a head start as you’ve already covered much of the application. In the loan processing stage you’ll need to provide evidence of things like your income, identity and current address. An underwriter will verify your information and consider your application, and this can take varying amounts of time from lender to lender.
After your mortgage provider’s completed their checks on your financial suitability, they’ll want to carry out a valuation on the property you’re buying. Whether your lender uses their own surveyor or an independent one to complete this part of the process, they’ll check that the property’s correctly priced and suitable for them to provide a mortgage on.
Whether you have a basic survey or a full structural one – which is recommended for older or listed buildings – will determine the price you’ll pay. With surveys though, it’s a good idea to keep the old adage ‘buyers beware’ in mind. Paying for the most suitable survey earlier on could save you a lot of money and hassle further down the line.
If your mortgage application is successful, you’ll receive an offer from the lender. It’s really important to fully check and understand the terms of the contract you receive. You’re making a big commitment that’s likely to last for many years to come, so again you want to minimise the risk of any nasty surprises. Make sure you’re happy with the mortgage product you’re getting, and that you can cover any changes in the rate you have to pay for the duration of the contract.
If you’re happy with the offer from your mortgage provider, then you’re ready to take the final steps. When all of the relevant searches and any enquiries regarding the property or your mortgage are resolved, you will need to pay the deposit to your conveyancer and prepare for the exchange of contracts. To do so, it’s crucial to make sure that the funds you’re going to use are ready and accessible. Whether you’re using money from a savings account or receiving a gift from a family member, you don’t want to encounter any delays at this stage.
Should you be buying and selling at the same time, the funds you’re receiving from the person buying your existing property will be used towards the deposit for your new one. However you’re paying the deposit, your conveyancer will transfer it to the seller’s conveyancer. You’re now ready to exchange contracts, at which point the deal becomes legally binding and the completion date will be fixed.
Take a look at our handy moving house checklist when you have begun the conveyancing process to help you with all the preparations you will need to consider when moving into your new home!
When the exciting day of completion arrives, your conveyancer will use the money received from your mortgage lender to send the balance of the purchase price to the seller’s conveyancer. As soon as the funds are received, you’ll be able to pick up your keys and get started with your big move.
Disclaimer: The article above is only a rough guide to give you and idea on the mortgaging process.