If you are a first time buyer looking to take your first steps on the property ladder, the mortgage application process can be a daunting one. This is why it is important a first time home buyer finds out as much information as possible about this process.
To begin with, anybody looking for a mortgage, particularly a first time buyer, should ask themselves the all-important question: ‘how much money can I afford to borrow?’. This question should be followed by asking how much you can afford to pay upfront for your first house. You will find a better mortgage deal if you are able to put down a larger deposit.
Once you have considered these questions and come up with answers to suit your situation, the rest of the application process is as follows:
- Sourcing a mortgage
You can obtain a mortgage either via a broker or direct from a Bank or Building society.
A mortgage broker will give you access to a large selection of mortgages, as well as being able to assess your circumstances to find the best first time buyer mortgage for your particular situation. Or alternatively you can research yourself and contact a Bank or Building society directly.
This stage of the application process will include a credit search, which will help lenders decide if they wish to lend to you.
- The Decision in Principle
A Decision in Principle (DIP), sometimes referred to as an Agreement in Principle, is the lender agreeing to lend to you, pending completion of adequate paperwork, a valuation of the property and credit checks.
A DIP puts you in a much better position when it comes to making an offer on a home.
- The formal application
When you make an offer on a property, the next step to becoming a first time home buyer is to make a formal mortgage application on your dream house.
Although at this stage you have had a Decision in Principle, your mortgage application could still be declined. To determine this, the mortgage lender will review various information, such as how much you are looking to borrow from them, your credit history, employment status and the property you are looking to buy.
- The valuation
Your mortgage lender will arrange for the property you wish to purchase to be valued by a surveyor, to ensure that the valuation reflects the agreed purchase price.
The application will then proceed on the basis of this valuation.
- Making a formal offer
As soon as your application has been processed and approved by the lender, you will be extended a formal offer. A copy will be sent to your conveyancer.
Usually the same conveyancer will act for both you and your mortgage lender. Your conveyancer will be required to carry out various checks to make sure the property is ok from a legal perspective and to give assurances to the lender. Once this has been concluded, the next step is exchange of contracts which takes you one step further to becoming a homeowner.