Getting a mortgage is often one of the most significant decisions for people in the UK. This is a lengthy process, from saving up a deposit and getting an offer in principle to choosing a dream home and paying regular instalments. In this blog, we unpack the process to explain how you go from starting saving to moving in.
Read on to learn more about mortgages and how they work.
Mortgage in Principle | A Few Days
Most of the time, the first step for a homebuyer is to get an offer in principle. Also known as an agreement in principle (AIP) or decision in principle (DIP), this official document from a mortgage lender uses detailed information to give you an idea of what you could expect to borrow. It will also tell you how likely you are to be accepted for a mortgage, so it’s essential if you have a history of bad credit or missed payments.
To get a mortgage in principle, you’ll need a few things, including
- Income Information
- Spending Records
- Any Credit Agreements
- Previous Addresses (Up to Three Years)
Once your broker or lender has this information, they usually take a few days to get back to you with a decision. If you are unsuccessful or unhappy, you can seek out further advice.
If you’re happy, move on to the next step.
Find a Property | Up to Three Months
Now that you’ve got your mortgage in principle, you can start looking at properties. Your offer will show how much you could borrow, and the combined amount of this offer and your deposit will be your maximum purchase price. For example, if your offer is £260,000 and you have a £40,000 deposit, you can look at homes up to £300,000.
It’s hard to put a fixed timeframe on this part of the process, as some people select something quickly, while others may be more discerning. Most offers, in principle, last between 60 and 90 days, so it’s best to keep your search below this threshold. If you don’t, you may return to step one again.
Apply for a Mortgage | A Few Hours
If steps one and two are checked off, it’s time to apply. This application process takes a few hours and is much easier when done with an expert mortgage specialist. By working with a specialist, all you need to do is let them know you’re ready.
A specialist will let you know what to provide and advise you on your next steps. If you didn’t get a mortgage in principle in the first place, that’s okay. You can just apply for a complete mortgage offer straight away. While an AIP is preferable, it’s not always required.
Mortgage Valuation | Up to Two Weeks
Once your application is in, it’s the mortgage lender’s turn to do their due diligence. At this point, they’re checking that the property you want to buy is worth the asking price you’ve agreed to. This protects you and them, as you won’t be overpaying, and they won’t be lending you too much money.
This is called a valuation survey and can be done in one of three ways. It will either be done with a physical, curbside, or, more commonly, an online inspection. These inspections can be chargeable, typically between £150 and £1,500, but your mortgage contact will advise this in advance.
To get a mortgage valuation, it typically takes around a fortnight.
Mortgage Offer | Up to Three Weeks
When a mortgage offer comes through, it culminates almost six months of hard work. If your mortgage valuation was successful, this offer will include how much you’re approved to borrow and the terms that you’ve been accepted for. It will also include information about any additional fees that may be added to the loan.
Usually, it takes up to three weeks for this to arrive, and a copy will also be sent to your conveyancing solicitor.
Exchange Contracts | Up to Two Months
While the offer stage is the most exciting, this next stage is the most important. Exchanging contracts is when you legally commit to purchasing the property. Until this point, either party could pull out, but exchanging contracts means that everything is rubber-stamped.
You could exchange contracts anytime after your mortgage offer has come in, but most people still need to wait between one and two months before exchanging. Your lender and conveyancing solicitor are working hard to get all the paperwork together, and your seller’s team will do the same.
Once everyone is happy, contracts can be exchanged.
Completion | A Few Weeks
You’ll officially be complete within a couple of weeks of exchanging contracts. This is when the whole house sale goes through, and you can move in. If you’re part of a chain (where multiple buyers and sellers are buying from one another), you may have to wait longer as you’ll need every party to be ready simultaneously.
On top of this, some lenders require you to leave at least five working days between exchanging and completing.
Now that you know how mortgages work, you’re set to start looking for your own. This nearly seven-month process can be a marathon, but with help from Bower Home Finance, it can be much easier. We’re proud to provide customers with various mortgage products, including first-time, green, interest-only, and more. With products for young families and investors, we’re here to help you achieve your financial goals.
Get in touch with us today to learn more about everything we do.