Buying a House Part 3

by Mark Johnston

The next step in the process is to arrange a mortgage, if the buyer has not already done so.

Finding the right mortgage can be tough especially when there are so many products on the market at present.

A mortgage can either be obtained directly from a lender such as a bank or building society or from a mortgage broker or financial adviser.

Using a broker or financial adviser will give a borrower an overall view of what deals the mortgage market has to offer and these deals will particularly cater for the borrower’s individual needs.

However as said before the potential borrower can arrange a mortgage directly with a lender, of course lenders will only recommend from their own mortgage range.

Many first time buyers have over stretched themselves in the past, so it is important to make sure you can comfortably afford the repayments.

When choosing a mortgage, potential borrowers should consider all their mortgage options, including the type of mortgage (repayment or interest only), the lender and the type of interest rate (fixed/tracker/capped/discounted), all of which should suit their own needs.

Buying a first home will not be without its hitches, lenders are much more cautious about lending these days, therefore borrowers will find they need much bigger deposits.

Nici Audhlam-Gardner, mortgage director at Abbey Alliance and Leicester suggests’ “you will need to save at least 20% to get a decent rate on a mortgage”.

Most lenders will use a borrower’s annual salary as a guideline for the size of mortgage loan they will offer, since the recession kicked in they are much more constrained and will probably only offer 2 or 3 times the annual salary.

During the application process borrowers will be asked about their monthly spending, this is so that the lender can build up a picture of what they earn and what they spend. Therefore before meeting with a lender it may be worth getting this information together before hand. This should include all household bills as well as any other loan commitments.

Mortgage fees should also be taken into account at this point. These fees can vary substantially, but typically those deals with a lower rate will come with bigger fees and vice versa. For an average mortgage deal borrowers should budget for fees around £600.

It should take around 3 weeks from the start of the application process for a formal offer to be made, although this timescale may vary.

Whoever agrees to lend the money will want to have the property valued, to ensure they agree with the price offered and also to make sure that they can recoup their loan if for any reason the borrower stopped paying the mortgage. The potential borrower will have to pay for this themselves and the fee is payable in advance.

The buyer can also decided at this point whether or not to have an independent survey carried out. These examine the structure of the property and should identify existing or potential problems.

It is possible to use the same surveyor that carries out the valuation and this may be a cheaper option.

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