We hope your house hunting is going well. Finding your first house is both exciting and a little scary. Here’s a helpful list of 10 easy to avoid mistakes first time buyers make when searching for their mortgage. Don’t search alone, let us help.
1.Not being on the electoral register.
Probably the easiest ways for a lender to verify your identity is check the electoral register, so make sure you’re on it! Not being, can result in your application taking longer to process, and furthermore it may cause your credit score to take a hit too. Putting yourself on the electoral register is very easy, all you have to do is fill out a short application at https://www.gov.uk/register-to-vote.
2. Not checking your credit score.
Think of your credit score as your financial CV that lenders will assess before deciding whether to lend to you. If your score is poor, then there is a risk that your application could be rejected. This may cause more damage to your credit score, as rejected applications count against you.
Therefore, its vital that you check your credit score before applying for a mortgage, so that you have the chance to correct any errors on your record and get your credit rating in the best shape possible. However, it’s also important to mention that even if you have a poor credit history with defaults or County Court Judgments (CCJ) on your file, it may still be possible to get a mortgage.
You can check your score and report for free in many places, but we recommend that you use www.checkmyfile.com
3. True cost of buying a home.
Even though the property you are buying will be the biggest expense, the cost of buying a house includes so much more than many people realise.
Other costs that you’ll need to consider include getting a valuation/ survey, lender fees, broker fees and legal fees. In many cases lenders will offer a free valuation, and may allow you to add their fee to the mortgage, but you should still allow for them to be on the safe side and take professional advice. In addition to these fees, you should also consider things like the household bills you will pay as a homeowner which include things like building/contents insurance, gas and electric, water and council tax. It is important to calculate how much you’ll need to have saved to cover these costs so that you don’t get caught out.
4. Not getting an agreement in principle.
It is very easy to get caught up in the excitement of looking for a home, but to avoid disappointment it is important to work out your mortgage options first. Before you start viewing properties, it’s a good idea to speak to your bank or a broker to see if you can get an agreement in principle first. This is a certificate from a mortgage provider that shows how much they are likely to let you borrow. These are generally valid for between 30 and 90 days. While it’s not an official offer from your lender, it gives you an accurate idea of your budget, and can also reassure sellers and estate agents that you’re serious about buying and can realistically afford the property.
Not getting an agreement in principle first could lead to disappointment, especially if you find a property you want but cannot get a big enough loan to purchase it, or someone with an agreement in principle gets accepted over you because they can demonstrate that they have done the groundwork.
5. Not researching the area where you want to buy.
It makes good sense to work out your priorities for the area you want to live in before registering with an estate agent or starting to look online. Think about and consider the following: transport links, green space, good schools, range of amenities such as shops, restaurants, and gyms? Considering these things first will help you to make selecting an area easier. If at all possible, try to spend a day or so in any areas you like, that you might not be familiar with in order to get a real feel for the atmosphere and the area in general.
6. Underestimating how long it takes to get a mortgage.
Unfortunately, when it comes to getting a mortgage, there is no definitive timescale for how long it will take for your application to be approved. In general, most borrowers can expect to wait around 2 – 4 weeks between applying and getting a mortgage offer, however it could take much longer, and under the strains of the Covid-19 pandemic, longer is the ‘new’ norm. It is vitally important to get your agreement in principle arranged as soon possible before rushing into making an offer on a home.
7. Not asking enough questions.
Probably the most exciting part of the process is viewing properties, but it can be overwhelming, so you’d be forgiven for wanting to make an offer on the first home that seems to tick all your boxes. DON’T RUSH! Doing so and making an offer on the first place you ‘think’ ticks your boxes, could leave you stuck in a home that doesn’t live up to your expectations. It could require expensive renovations or repairs and in the long run could end up costing you more money. Therefore, before you commence viewings, draw up a list of questions that you would like to ask. In every property you visit, test out things such as windows, doors, and lights. If possible, look behind furniture and fittings that may be hiding any defects (yes sellers do this!).
Ask as many questions as you like such as: how long they have lived at the property, why are they moving, what are the neighbours like, etc. Find out how long the property has been on the market by not only asking the agent, but by doing online research too (check places like www.zoopla.co.uk as they often show previous market listings as well as sales). If you discover that the seller has been struggling to sell their property, they may be open to accepting lower offers to make a quick sale.
8. Buying a ‘non-standard’ property
There are certain properties to avoid, when you are looking for a home, if you want to easily get a mortgage. As an example, some lenders may not offer a mortgage on flats above shops or commercial premises, because they are at greater risk of being affected by things like noise, smells and security issues which are beyond the owners’ control and could negatively affect the future value of the property.
The same applies to new-build homes, lenders are often stricter with the amount they will lend as they can protect themselves against the property losing value in the early years of ownership. If a non-standard property is a consideration for you make sure that you get as much information as possible that could help your mortgage application. You will often find that speaking to a broker in these circumstances would result in a quicker and more rewarding result.
9. The difference between Freehold and Leasehold
With a leasehold property, there may be limits on what you are able to do with your home. It’s also possible that you may have extra costs. With a leasehold property, you have the right to live in the home for a certain number of years, this is the number of years left on your lease, but you won’t own the land it stands on. You will often be required to get permission from the freeholder – the person who owns the land – before you can make any alterations to the property. Leaseholders are also required to pay ‘ground rent’ as well as other service charges, and these can sometimes be very expensive.
However, if you buy a freehold property, you will be the sole owner of both the building and the land it sits on. You won’t have to pay things like ground rent or service charges, and you will be responsible for the maintenance of the building. It is really important to know the difference between these property types so that you aren’t caught out by unexpected costs and restrictions later down the line.
10. The wrong solicitor
Most mortgage lenders have a panel of solicitors who they are prepared to work with. If you decide to use a solicitor that is not on their panel, they may not be able to carry out work on behalf of your lender, and so you will find that you must pay extra for one of the approved solicitors to be instructed by them. If you are trying to keep costs down, check your lender’s approved list before settling on your solicitor so that you don’t end up paying more than you need to.
None of these are insurmountable mistakes. There will be a solution to all of them, get the right advice before you start.
