It’s impossible not to be emotionally involved, but to get things right you should not let yourself be bullied by the media or anyone else. It’s your money, and your home.
Whether you’re buying your first flat, hunting for a family house or retiring to your dream village, buying a home is one of life’s most important milestones. It can almost be like you are buying a new lifestyle – so you do need to keep your wits about you and your eyes open.
At Cunningtons Solicitors we are not phased by the process: after all, we’ve been conveyancing property since the 18th century, helping generations of families with their housing needs. For us, helping to make sure the whole process moves as smoothly as possible is simply part of our job. We know what it takes to keep a property purchase on track.
1 – First Things First: The Finances
Get finance in place early – and be realistic
Get your mortgage in place early. The reason for this will become all too clear when it comes to actually making an offer on a property. Obviously, being a ‘cash buyer’ is the dream position to be in. For the rest of us, the next best thing is to be able to show the seller a mortgage decision in principle.
Merely being able to say you’ve got finance “more or less sorted” won’t inspire much confidence and could mean being beaten to your ideal property by another buyer who really does have the finance in place.
A firm mortgage offer serves as a useful point in your favour when it comes to negotiating a discount on the asking price.
Finding a mortgage
If you’re financially savvy, you may be inclined to research and source your own mortgage. If you’re not confident doing this – or if you simply don’t have the time – you’re likely to benefit from independent advice. The key here is ‘independent’ as opposed to an advisor tied to specific institutions. Rather than a general independent financial advisor, look for a specialist mortgage broker.
If you’re self-employed, if you’ve had problems obtaining credit in the past, or if you only have a limited deposit, you may find your choice of lender is limited. In these situations, the services of a reputable mortgage broker are likely to be especially useful.
From April 2014 around 50 per cent of borrowers were required to meet a qualified mortgage advisor before they entered into a mortgage; they provide advice on whether a specific product (or range of products) is appropriate for you.
Looking financially healthy
There’s no denying that the 2008/10 recession was a huge wake-up call for lenders and borrowers alike.
The impression was that too many people were being talked into taking on too much debt – and that not enough was being done to check what borrowers could afford. Although the mortgage market had been working well for many people, others found themselves faced with severe hardship – particularly if the market stalled or if their situations changed unexpectedly.
The Government realised something had to be done to constrain high-risk lending and borrowing; that’s why the Mortgage Market Review was introduced in October 2012. Most of the changes came into effect in April 2014 and these days buyers can expect a thorough affordability check.
- Lenders are fully responsible for assessing whether the customer can afford the loan they are taking out, and they have to verify the customer’s income.
- Lenders are allowed to grant interest-only loans, but only where there is a credible strategy for repaying the capital.
- Full evidence of the borrower’s income is required, as well as full details of expenditure, including committed expenditure (such as loans, credit cards and child support), basic essential expenditure (including utility bills, council tax and insurances) and basic quality of living costs (clothing, commuting costs, food etc.).
‘Clear the decks’ before applying for a mortgage
Lenders are now required to delve deeply into your financial situation before agreeing to set up your mortgage. They must demonstrate that your loan is affordable and that in the eyes of the regulator they are acting in customers’ best interests.
Here are a few tips on how to reduce the chances of being turned down:
- Check your credit report. An ignored credit hire agreement, a gym membership you forgot to cancel, a bill that went to the wrong address: lenders will look at your credit history and these are the type of entries that can result in a negative score. Check your history and deal with any mistakes or any outstanding entries. You can order a report by clicking here.
- Get your paperwork in order. If you’re self-employed, you’ll need evidence of sufficient income for at least two years.
- Reduce what you already owe. If possible, pay off any outstanding loans before you apply for a mortgage.
- Reduce your outgoings. Think about any unnecessary expenditure which can be cut out at least three months before your application to make your financial position look as healthy as possible.
- Avoid ‘Pay Day Loans’. Short term loans look very bad on your credit history, as they smack of desperation.
- Keep everything steady. Avoid drastic changes in circumstances before applying for a mortgage. Remember; lenders are looking for a ‘settled’ financial history.
- Check you are on the electoral roll. Lenders will need to verify your identity, and getting listed can avoid delays further down the line.
- Don’t apply for too many mortgages! If you keep applying for mortgages, it will seriously impact on your credit score. Investigate mortgage providers thoroughly before applying – find out if you’re likely to be accepted without actually applying first.
- Decide on your mortgage type. There are different types
- Use a mortgage broker. Find a qualified and regulated broker you trust; they have more experience of finding a mortgage than you, and it won’t damage your credit rating to find out!