If you’re reading this article it’s probably because you’re considering buying your first home, and you don’t know where to start. You may have seen mortgage ads everywhere, but you don’t quite understand what they all mean. In fact, the entire process of getting a mortgage can be quite intimidating and scary, especially if you’ve never bought a home before and have no idea how the whole thing works.
Checking and building your credit history
Ensuring you understand your credit history is a very important first step before you start your mortgage journey. There are many different mortgage lenders in the market that can help you; whether your credit history is perfect or whether you’ve had a blip along the way. Your credit history is tracked for six years and any missed payments, defaults or County Court Judgements (CCJs) will be logged on your file for this period.
Alternative to credit issues, you may be someone that has never taken credit at all and need to build your credit history. In order to do this, you may need to take out a line of credit i.e. a credit card. Any payments made should be cleared each month as this will show the mortgage lender you are capable of managing credit effectively.
All mortgage lenders check credit history when making a decision to lend, so even if you’ve had the odd credit issue, shying away from this is not recommended and should be dealt with head-on to ensure the right mortgage lender is found for you.
You can contact a number of different credit lenders to search your credit history or, alternatively, get in touch with an expert Home Group Advisor and we can recommend the right credit reference agency, to give you full visibility of your credit history.
Whatever your credit issues are, Home Group Advisors will endeavour to find a solution for you.
Get an idea of how much you can afford
First off, it’s important to check how much you can afford to lend from a bank or building society and this can be done by using a mortgage calculator. Most are fairly generic in that they deduct outgoings from income and then provide a figure that is four to five times your joint or single income. But if you’d prefer a more personal approach, Home Group can carry out their own affordability assessment and supply you with a robust agreement in principle.
Deposit, Fees and Insurances
To purchase your dream home you will require a deposit; the figure varies across mortgage lenders but in most circumstances you will need a minimum of 5-10% of the overall purchase value. For example, if you want to purchase a home for £200,000, a 10% deposit amounts to £20,000, leaving an £180,000 mortgage.
As part of the property buying process there are other things to consider, such as solicitor costs, mortgage advice fees, stamp duty, survey or valuation costs. You can check out our stamp duty calculator for first time buyers. A Home Group Advisor will talk you through the costs you’ll need to allocate funds to outside of your deposit.
You also need to ensure you are budgeting in your monthly expenses for insurance policy payments. Taking out a mortgage is a big step and if you are unable to keep up your repayments your home may be repossessed. Therefore, you’ll need to consider things such as life cover, income protection or critical illness. You’ll also need to ensure your home and its contents are insured; building insurance is compulsory for any mortgage lender.
Securing a Mortgage In Principle
If you’re wondering how to secure a mortgage in principle, it’s not as complicated as it may sound.
Getting a mortgage in principle is when you apply for a mortgage via a mortgage lender (a Home Group Advisor will arrange this for you) with your personal, income and credit information. A background credit check is then carried out by the lender. Don’t worry, this won’t affect your credit rating because it only leaves a ‘soft footprint’ and, once clear, it essentially provides you with the confidence to make an offer on the property of your dreams as you know the necessary funds will be made available by the lender as and when they are required.
As this is not a full mortgage offer, a full application, approved by an underwriter and a mortgage valuation, will be required. But a mortgage agreement in principle can be shown as proof to an estate agent that you are a viable buyer and can obtain the mortgage you need.
Finding your first home
Once you have your agreed budget (mortgage plus deposit), your maximum purchase value will be known and you’ll be able to search for properties within that price range. Normally you can find properties via popular property sites such as Rightmove or Zoopla, or you can get in touch with a local estate agent to guide you in the right direction.
What to look out for when viewing a property
When purchasing a property there are lots of things to look out for and consider, from the condition of the property and the availability of local amenities to whether the footprint is large enough for your needs.
In the majority of instances you should take out a homebuyer or full structural survey to determine whether the property has any defects or areas requiring immediate attention.
Naturally it is difficult to find a property that ticks every single box so you may need to make the odd compromise before finding the right home for you within your budget.
Making an Offer on your Home
Once you have found your new home and you have your deposit, funds for all the associated costs and mortgage in principle agreed, you are able to make an offer on the property.
The formal offer on a property will normally be done via your estate agent. This is a non-legal binding offer that the vendor (or seller) will either agree or decline and it may take some time with the estate agent to agree an offer between all parties.
Once the offer is agreed, the accepted offer will be the price that is used for your mortgage application and the deposit amount will be based on this. However, as part of the mortgage application a surveyor will complete a valuation or survey on the property to determine whether the property is worth the price being purchased at (your agreed offer).
In some instances the valuation and accepted offer may vary, in which case you’ll need a deposit based on the ‘value’ not the agreed price, as this is the most important figure.
Instructing a Conveyancer or Property Solicitor
As part of the homebuying journey you’ll need a Conveyancer or Solicitor to manage the legal process of purchasing the property. This involves liaising with the vendor’s (seller’s) solicitors, who carry out searches on the property in question in a bid to uncover any information that needs to be taken into consideration before the purchase is completed.
The solicitor also manages the drawing of funds from the mortgage lender and transferring of funds to the vendor’s solicitor at completion. The conveyancer or solicitor acts for you as a legal representative during the purchase process and also has obligations that must be met for the mortgage lender as part of drawing of funds.
Road to securing the keys to your Home
You are now on the journey to securing the keys to your home, but you are not quite there yet. The offer is agreed on the home, the solicitor or conveyancer you are using is instructed and you’ve submitted the mortgage application.
Before you are handed the keys to your new home though, the mortgage valuation needs to be completed and the underwriter needs to approve the mortgage and issue the formal mortgage offer.
You will also have some solicitor information to complete i.e. signing contracts and reviewing local searches that the solicitor conducts, to find out about any legal obligations of the property or any planning in the local area etc.
Once the mortgage offer is issued and the solicitor has completed their legal work, they will start to liaise with the vendor’s solicitor to agree an “exchange” and “completion date”. “Exchange” is the legal agreement to purchase the property pending completion.
Your solicitor will manage the process of drawing funds from the mortgage lender and managing the third party solicitor.
Completion Day
Once a completion date has been agreed, you are almost there. On the day of completion, as soon as all the funds from the mortgage lender and deposit have been transferred to the seller, both solicitors will confirm completion and confirm you as the homeowner. Normally at this point you will head down to the estate agent and collect your keys.