Buyers Guide
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Arranging a mortgage in principle.
Get a mortgage agreed in principle before you begin looking for a property, that way you know how much you can afford to spend on a property. This also puts you in a favorable position when making offer.
What is a mortgage agreement in principle?
A mortgage agreement in principle also known as a mortgage promise by some lenders basically means the lender has completed their credit checks and subject to confirmation of the details you have provided references etc... and the property being suitable security (after the valuation), the lender has agreed to advance you a mortgage. This provides you with the assurance that you can get the mortgage loan amount you require and the lender is willing to lend. The mortgage agreement in principle will be valid only for a short time usually 1 to 3 months.Is the mortgage agreement legally binding?
All lenders can in extreme circumstances at any time prior to completion of your property purchase withdraw its agreement in principle and the full mortgage offer if they feel that there has been non disclosure or if your financial circumstances have changed and you can no longer afford the mortgage. Also any disclosures you make to your solicitor will also be reported back to the lender as the solicitor not only has a responsibility to you the buyer and but also the lender. The lender is therefore not obliged to give you a loan even if you have an agreement in principle, because its not legally binding.But where do you start?
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Apart from your mortgage you should also consider the following additional costs when purchasing your new home:-
- Valuation/survey fee
- Deposit (The bigger the deposit the more mortgage options you will have)
- Mortgage arrangement fee
- Solicitor's fee's
- Moving costs
- Stamp duty
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Viewing tips
The only way to really make your mind up about a property is to go and look at it. In the relatively limited time the viewing lasts you need to gather as much pertinent information as you can, if necessary go back for a second viewing. Always take someone with you as it's safer and also a second pair of eyes may spot things you don't.
Consider the following practical elements when choosing a new home.
- Will your furniture fit?
- Is there enough storage?
- Do you need to renovate or redecorate and can you afford to do so?
- Look at the available parking space
- If you like the sun is the garden south facing?
- What local amenities are there?
Ask the vendor (the person selling the property):
- How long has the property been on the market?
- What are the neighbours like? have there been any disputes?
- How safe is the neighbourhood?
- What fixtures and fittings are included in the price?
- Are they in a chain?
- If they have a Home Information Pack (HIP), request a copy.
- Is there any other relevant information that you need to consider?
View the property at least twice and at different times of the day so you can get an idea of what the neighbourhood is like and how this may affect the property. After office hours parking may become a problem or if near a school consider traffic, school runs etc.
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Making an offer
If you are in England and Wales offers are not legally binding until you have exchanged contracts, however in Scotland it's a different matter.
Under Scottish Law when you make an offer to purchase a house and the seller accepts your offer, a binding contract is formed (if in any doubt you should always seek legal advice before committing to a purchase).
Before you consider the amount you are prepared to offer you should consider the whole package you are offering and consider how this may fit with the property seller (vendor). And expect to provide evidence if you succeed.
Examples:
You are a first time buyer
You are a cash buyer
You are buying for an investment
You are not in a chain
You can complete quickly
Your mortgage has already been agreedThe vendor may accept a lower offer for a quick sale or they may simply want the asking price.
Knowing the vendors position does help you pitch your offer in monetary terms and gives you the opportunity to highlight the favorable position you are in - a buyer ready to proceed could be more attractive than a higher offer in a long chain.
Initially you may want to offer lower than the asking price but without risking losing the property or insulting the owners. If you're lucky the vendor will accept it, but if they turn you down then you need to keep coming back with counter-offers until both parties reach an agreement.
If the property you want to buy is particularly popular and you think there is another interested party then you may want to offer the full asking price or higher.
Offers are normally made over the phone, but if you are asked to put something in writing then make sure you write "subject to contract" and "without prejudice" at the top of any related correspondence. Nothing should be legally binding until contracts are exchanged, up until that point either party can pull out at any time (England and Wales).
Once your offer has been accepted make sure that you get it confirmed in writing by the vendor - you can also request that the property be removed from the market, however they are not obliged to do so.
Agree to keep in regular contact by email or telephone on a set day each week so you can both keep on schedule for your agreed target completion date.
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The legal process (Conveyancing)
Once you have had your offer accepted you need to instruct a solicitor or licensed conveyancer so they can complete searches on your behalf and arrange for the legal transfer of the property into your name.
You will need to pass on the contact details of your chosen solicitor or conveyancer (legal adviser) to the vendor (property seller) so they can pass the details to their legal adviser to get the process moving forward.
The legal process of buying a property should be reduced if you are able to use documents within a Home Information Pack if the vendor has one. However some mortgage lenders have come forward to confirm that they are unable to use any documents due to legal and insurance reasons.
Within a week of being instructed expect your legal adviser to request payment for disbursements (searches) that they are required to undertake on your behalf.
If you and the vendor have a target completion or exchange of contracts date make sure you let your legal adviser, broker and lender and know at the outset so you can keep on track and if there are delays remind them of the deadline.
In England and Wales you enter into a legal contract to buy the property once you have exchanged contracts, it is at this stage the deposit (typically 10% of the purchase) is paid to your solicitor. The last stage is completion when the balance of the purchase price is paid to the vendor and the property is officially yours.
If you are in a chain its advisable not to complete on a Friday, or any day which does not have a working day after the set completion date. As any problems or delays within the chain can result in your sale proceeding as planed and your purchase being delayed (typically solicitors not receiving funds in time to complete) meaning you have all your belongings on a removal truck for the weekend and nowhere to offload them or your family.
As a rough guide the process from start to finish can take on average 2 months. How long it will actually takes is dependent on how long local authorities take to complete searches and how quick the vendor's legal adviser takes to respond to queries raised by your legal adviser and if there is a chain.
