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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 15th March 2021*

Buying a house should be a happy, life-changing event, but if you’re new to the process, it can be overwhelming. Although things can be tough if you’re going it alone and don’t know what to expect, we’re here to remove any fear and uncertainty from the equation.

In this article, we’ve broken every step of the house-buying and mortgage application processes into palatable steps and outlined the merits of having a mortgage broker guide you through them.

If that’s not enough, we’ve also fielded some of the queries we hear most often from new house-buyers and first-time mortgage applicants in our FAQ section.

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What does the homebuying process involve?

Buying a house usually involves finding the right property, making an offer on it, appointing a solicitor and surveyor and going through the mortgage process, unless you’re fortunate enough to have the means to buy outright. The journey to homeownership can seem long and arduous, so we’ve broken it down into the easy-to-follow steps below…

Step 1: Saving for a mortgage deposit

The minimum deposit amount you’ll need to get a standard mortgage is 10% of the property’s value. Saving up the absolute maximum amount you can manage is advisable, as this will mean a wider choice of mortgage products and therefore potentially more favourable interest rates and deals.

If you’re having trouble saving up a deposit, support could be available to you. There’s government assistance, including lifetime ISAs for first-time buyers and the latest version of the Help to Buy scheme. See our guide to government mortgage schemes for further details.

Moreover, if you have a family member who’s willing to help you out with your mortgage deposit, there are flexible lenders who allow gifted deposits and others who offer a range of low deposit mortgage options, and even zero deposit options such as a Family Springboard Mortgage.

The best way to find the right lender for these niche circumstances is to apply via a mortgage broker, and we can find the perfect one for you.

Step 2: Find a property that’s in your price range

Assuming you don’t already have your eye on a specific property, you can use online platforms such as Rightmove, Zoopla and Home to browse the available homes in your area of choice. This should give you an idea of the prices available and it’s always worth cross-checking them against the information on the Land Registry database.

At this stage, it would be useful to work out exactly how much you will be able to borrow, presuming you will need to take out a mortgage to buy your home. This won’t be the same figure across the board, as some mortgage lenders are more generous than others.

As a general rule, most mortgage providers allow eligible customers to borrow 4.5 times their income, while others will stretch to 5 times and a minority 6 times. The actual amount you’re offered may also depend on your outgoings, as most lenders take debt-to-income into account. There’s no set rule on how high your outgoings can be, but keep in mind that significant financial commitments elsewhere could restrict your borrowing potential.

For a rough idea of how much you could potentially borrow on a mortgage based on your income and expenditure, head over to our mortgage affordability calculator page.

Step 3: Get an agreement in principle and make an offer

Now would be a good time to speak to a mortgage broker to find the best lender for you and source an agreement in principle. A mortgage broker with the right expertise can maximise your borrowing power and ensure you end up with the most favourable deal.

We offer a free broker-matching service that will pair you up with the right mortgage expert for you. Using it can ensure that you’re introduced to the lender best positioned to offer you a favourable deal when the time comes to apply. Not only does this mean saving money in the long run, you can also save time since your broker will help you with the paperwork.

It’s a good idea to check your credit reports before approaching any mortgage lenders. This will give you the chance to challenge any errors, have outdated information corrected and give you an idea of what the lender will see when they look into your financial history.

Once your broker has tracked down the best product that you qualify for, you can agree to take out the mortgage ‘in principle’. At this stage, you’ll learn how much the mortgage lender is prepared to let you borrow and how much interest you would need to pay. Some lenders might charge a booking fee to reserve the mortgage, typically between £99 and £250.

For in-depth information about what the mortgage application process involves and how a broker can help you with it, see our guide to mortgage applications.

How do I make an offer?

Knowing you could potentially borrow the amount you need, the next step is to make an offer on the property and this is normally done through an estate agent.

There won’t be any estate agent fees to pay unless you’re selling a property (in which case they’re normally 0.5-3% of the selling price plus VAT).

Step 4: Appoint a solicitor and surveyor

You’ll need a solicitor to handle the legal work surrounding your property purchase. They will also submit searches to the local council to check whether any planning issues or local factors might impact on your home’s value. A solicitor will typically cost you between £500 and £1,500 plus VAT, and they may ask for a deposit (usually 10%) upfront.

A surveyor is essential to have the necessary surveys carried out on the property. This will root out any problems that could affect the cost of your home or scupper the agreement.

First, there’s the valuation survey which the lender has carried out to make sure your home is worth what you’re paying for it. Some mortgage providers won’t charge you for this, but if you have to pick up the bill yourself, it can range between £150 and £1,500.

It’s also more often than not recommended to have a to have a property survey carried out to identify any structural issues and essential repairs. Not only will this potentially give you leverage to negotiate a lower price, finding these problems early can stop you being hit with a massive repairs bill down the line.

Property surveys can cost between £350 to £800 depending on the property type and the type of survey you choose (some are more thorough than others).

As part of the service we provide, we can help you carry out a comparison of solicitors and survey costs so you can choose the most cost-effective options.

Step 5: Finalise your offer and complete your mortgage application

Your property surveys may have given you some room to negotiate a better price on the property you’re buying. Your mortgage broker can advise you on how best to proceed here, but if no issues were detected, your advisor will instruct your lender to proceed.

There is often a fee due at this point, the arrangement fee, which some mortgage lenders will waive while others can bill you for up to £2,000. If the charge is applicable, it’s normally possible to add it to your mortgage, but keep in mind that this means paying interest on it.

If all of this goes smoothly, you will receive a binding offer from the mortgage lender. This is valid for at least seven days, so your broker can shop around and compare it to other deals on the market, if you’re unsure whether there might be a more suitable product elsewhere.

Step 6: Exchange of contracts and completion

If you decide to take up your mortgage lender on their offer, next up is the exchange of contracts. Ask your solicitor to go through the agreement with a fine-tooth comb and speak to your mortgage broker if you’re unsure about anything. The deal is legally-binding once you and the seller sign the contract, so make sure you’re happy with everything before then.

After the exchange of contracts, the money changes hands. It is transferred from your solicitor’s bank account to the seller’s solicitor’s account, a service that usually comes with a telegraphic transfer fee of around £25-50.

There may also be a mortgage account fee to settle up. This is a charge to cover the setup, maintenance and shutting down of your mortgage account, usually in the £100-300 region. You can add it to your mortgage or pay it up front to avoid adding interest.

Finally, your solicitor’s bill will need to be paid on completion. The deposit and local search costs should have been taken care of already, so a typical fee for the outstanding legals would be between £500 and £1,500 plus 20% VAT.

What happens after the mortgage process?

The property might be legally yours but you’ll still have a few loose ends to take care of, from arranging insurance to paying stamp duty, but we’re here to help.

Below, you’ll find a handy breakdown of everything that needs to happen after your mortgage has been finalised.

Your solicitor needs to update Land Registry

If you bought in England or Wales, your solicitor will do this for you but be sure to check the Land Registry database to make sure the sale has been recorded correctly. For homes purchased in Northern Ireland, your legal representative will register the sale with Land and Property Services, and in Scotland they will update the Registers of Scotland.

Paying your stamp duty

If you bought a home in England or Wales worth over £500,000 at the time of writing, you have 14 days from completion to settle the bill. Your solicitor will usually arrange the payment for you. To find out exactly how much stamp duty you’re liable for and what the rates will be from April 2021, consult the UK government’s website.

Arranging insurance

Once you’ve exchanged contracts, you’ll need a buildings insurance policy if you want to cover the structure of the building. There are a range of options available at various different prices, some with contents insurance included and others standalone.

Your mortgage broker will be able to go through all of the potential solutions with you, and may also suggest considering other types of protection insurance that are popular with householders. Policies such as life insurance and critical illness cover should be considered when you progress to full mortgage offer, but it isn’t too late to explore your protection options if you didn’t take one out at the recommended time.

Hiring a removals company

Not everyone needs a removal company to transport their possessions into their new home, but if you’re one of the many that do, they can cost between £300 and upwards of £600. You could potentially save money by moving during the week as weekend fees can be higher.

As part of the service we provide, we can match you with a cost-effective removals company, so you won’t need to lift a finger sourcing one yourself.

The underwriting process

The underwriting stage of a mortgage application will take place after the agreement in principle process. They will vet your application and take a deeper look at your finances and credit report to double check that the information you’ve provided is accurate as well as give the mortgage lender a full picture of the risk they’re taking on.

The underwriting process runs concurrently with the mortgage lender’s affordability and eligibility checks, so no action would usually be needed on your part, unless the underwriting team requests additional information.

During the underwriting process, the following information will be cross-checked…

  • Your credit report (a hard credit check will be carried out)
  • Details about the property (valuation, potential issues etc)
  • Affordability (the underwriter will double check this)
  • Eligibility (based on the underwriter’s own policy and wider fraud rules)

For in-depth information about the underwriting process and what to do if you’ve had a mortgage application declined at this stage, see our guide to mortgage underwriting.

FAQs

Got a question about the homebuying process that isn’t covered above?

In this section, we’ve addressed the queries we hear most often on this topic…

When do solicitors ask for proof of deposit?

You may be asked to prove that you have enough deposit and evidence where it came from at the beginning of the process, although some lenders may be willing to do an agreement in principle without it. Your solicitor might ask to review your bank/savings account statements, signed contractual agreements and other forms of certification to make sure you have enough funds and verify that they came from an accepted source.

Find out which deposit sources mortgage lenders prefer and how to go about evidencing your funds in our guide to providing proof of deposit for a mortgage.

When will my solicitor check for proof of funds?

You can expect to be asked for proof of funds more than once during the homebuying process as the estate agent, your solicitor, the seller’s solicitor and your mortgage lender are all legally required to see it. You’re likely to be asked for proof at the outset.

Having proof of funds will verify how you will be paying for the property after having an offer accepted. This would usually be via a mortgage, the sale of another property, buying outright, or a combination of these methods.

Do I need to have an environmental search carried out?

Environmental searches are common practise for mortgage applications in the UK and your lender might insist that one is carried out with the other surveys.

This is an important check as it will reveal whether the property you’re buying was built on or near contaminated land or water, or near an old landfill site. This is need-to-know information since former industrial land could still contain toxic substances and pose a health hazard.

During this search, you’ll also learn whether the land you’re buying on is at risk of flooding.

What happens after the searches are complete?

If all goes to plan, you will be invited by your solicitor to sign the contract paperwork including your mortgage deed.

However, it might be the case that issues are identified at this stage, and they include…

  • A flood/environmental risk
  • Evidence of subsidence
  • Compulsory purchase orders or enforcement notices
  • A recent planning application in motion
  • Infrastructure work from the local council could impact on the property
  • Drainage or water issues
  • A previous or ongoing boundary dispute

If one of these issues is uncovered, you conveyancer will bring you up to speed on what it means for your property purchase. At this stage, you can still legally pull out of the agreement, renegotiate the price or choose to proceed despite any risks involved.

How long does it take for the searches to come back?

Conveyancing searches typically take between two and four weeks. In the majority of cases, things move forward without any major issues. But if problems are detected, this could draw the process out so solutions can be discussed with all of the parties involved.

What happens to my mortgage when I sell my house?

Unless you’re porting your mortgage to your new home, the debt will usually be settled by the proceeds raised from the property sale. Your solicitor or conveyancer will arrange this by requesting a redemption statement from your lender and using the completion funds to repay the outstanding amount.

If you need a mortgage to buy your next home, this will be treated as a new application even if you’re porting the mortgage from your previous property.

Speak to an expert

If you’re new to the homebuying process and need some assistance, we’re here to help. We offer a free broker-matching service and can pair you to a mortgage expert who will guide you through the process step by step, help you with all of your paperwork and make sure you’re introduced to the best lender for your needs and circumstances.

What’s more, we can also help you find the most cost-effective deals for your insurance needs, removal services and even solicitors. An initial consultation with one of the experts we work with won’t cost you a penny, but it could save you time, money and potential disappointment in the long run.

Call 0808 189 2301 or make an enquiry online and we’ll introduce you to an expert who can steer you through every step of the homebuying process and fulfil your every need along the way.

Updated: 15th March 2021
OnlineMortgageAdvisor 2021 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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