Although the mortgage process involves paperwork, credit scores and legal fees, first-time buyers can reduce much of the work by familiarising themselves with the application process. Entering the process prepared and familiar with each stage of the process will streamline the procedure and help you navigate your way through the mortgage application as swiftly as possible.
Stage One: How Much to Borrow?
Many lenders websites offer mortgage calculators which will help you get a rough starting idea of how much you can afford to borrow. Typically, your mortgage will be around 3.5 times the largest household salary, plus the secondary household salary; or three times the joint household income. However, the amount of money you have saved to put down as a deposit will also affect the figure the lender is willing to let you borrow.
Although these online mortgage calculators offer an initial, general indication of the amount you can borrow, it will be subject to the lender’s own, more thorough, assessment. The lender will need to see the following when carrying out an assessment:
- Copies of both of your photo IDs.
- Proof of address.
- 6 months of bank statements on all of your bank accounts.
- 12 months of loan statements on any loans or existing mortgages you may have.
- 6 months of credit card statements.
- A salary certificate signed by your current employer.
- Your last one or two P60 forms.
- 3 months of payslips.
- Any separation agreements and maintenance commitments you might have.
The lender will evaluate your documentation and calculate the balance they are willing to lend you. During the first meeting with your mortgage provider, they should also talk you through their application process and clarify any questions you may have about the process.
Once your lender has decided how much they will lend you, they will give you an agreement in principle. This means they have agreed to lend you this figure, providing they are satisfied with the property you select to purchase.
Stage Two: Work Out the Costs of Buying a Property
Now you have your agreement in principle, you can put in an offer on a property. But before you start looking at properties, it is worth totalling up all the hidden costs associated with getting a mortgage, so you can consider these in your total property budget. These costs could include:
- An Administration Fee to the lender of anything up to £1,000.
- A Mortgage Evaluation Survey of £225.
- Legal Fees which are typically around £500 for buyers.
- Land Registry Fee of £220
- An Independent Survey which could cost more than £300.
These fees are unavoidable and are part of the mortgage process. When you have budgeted for these fees, and you have a strong idea of what your budget will be, you can start viewing properties.
Stage Three: After You Have Found a Property
Once you have found the property you want, and your offer has been accepted, you must proceed to the full mortgage application. This is when your mortgage fees will have to be paid.
You will now need to find a solicitor to represent you and initiate the legal process involved in buying a property. Find a solicitor with plenty of experience in the area of property purchases and don’t be afraid to shop around to find a competitive price.
Stage Four: Conveyancing and Valuations
Your mortgage lender will want to carry out its own checks on the property to ensure that it is suitable collateral for the mortgage loan. Their valuation is not as thorough as an independent evaluation. It will pick up on any serious structural faults in the property but will not tell you about any costly maintenance issues that could appear in the near future. This is why it is best to get an independent survey carried out alongside the lender’s evaluation.
Once these checks have been completed, and both you, and the lender, are happy with the property, it is time for completion. At this stage, you will hand over your deposit and agree on a date to exchange contracts. From this point on, your deposit is non-refundable, and if you walk away from the deal before completion, you will lose your deposit and legal fees you have already paid.
All that remains is to sign the relevant paperwork, exchange contracts, and receive the keys to your new home.