you missed a bill because you had lost your job, but you are now fully employed and back to paying bills on time.
• REDUCE YOUR DEBTS (BUT DON’T WORRY ABOUT STUDENT LOANS)
Pay down any debt you have as much as possible before applying for a mortgage: lenders will look at your ‘balance trend’ as part of credit scoring. This does not include student loans. Arguably you would be better off boosting your deposit than using savings to pay down any student loan. See the next chapter for more on why.
• BE CAREFUL ON FACEBOOK
There have been stories that banks take what you post on social media into account. This is hard to prove, but Andrew Montlake, of the mortgage broker Coreco, told me that he would suggest those looking to apply for a mortgage should be careful about what they share. ‘Gambling stories, wild nights out and lavish spending boasts should probably be avoided.’ Also avoid sending or receiving cash to your bank with ‘banterous’ references. Banks have rejected people based on ‘drug money’ appearing on their statements, even if it is obviously a joke.
• DO NOT GET A PAYDAY LOAN
For some banks payday loans are also an absolute credit-score killer. Some banks will not lend to you at all if you have taken out a payday loan, others are less fussed. But best not to go anywhere near Wonga at least a year before you apply for a mortgage if you can help it. Ideally never go anywhere near Wonga.
• GET A COPY OF YOUR OLD REPORT IF YOU HAVE MOVED TO THE UK FROM ABROAD
If you have moved from abroad, bring a copy of your credit record from the main agency in your home country to the UK, then contact Experian, Equifax and Callcredit and ask them to put a note on your file that you are willing to provide a copy of your credit history. Monese offers bank accounts to people who have no proof of address, maybe because they have no credit record in the UK and therefore their name is not on a utility bill.
You have got a deposit and can afford a mortgage! So what is the process of buying a house?
You spot a house you like advertised with an estate agent. You work out whether you can afford it and stamp duty based on whether you can get a mortgage. You can at this stage get a ‘mortgage in principle’, which is a non-binding agreement stating how much, based on your income, outgoings and credit score, a bank will lend you. If all looks good, you put in an offer for the property, which is hopefully accepted by the seller. You then appoint a property lawyer to start what is called the conveyancing process. You find the mortgage you want – it doesn’t have to be with the same bank that gave you a mortgage in principle – and apply for it for real.
Once the sellers have accepted your offer there is still no guarantee that they will definitely sell to you, just a ‘gentleman’s agreement’. There is a chance that you could get gazumped. That’s where another seller swoops in with a higher offer, and a greedy seller dumps you for the new bidders. Gazundering is where you, the buyer, lower your offer just before exchange of contracts. There is nothing other than your conscience, and the risk of pissing off the seller, who may pull out, to stop you doing this, but all the same, better not to – bad karma.
Cross your fingers you do not get gazumped, and insist that the person you are buying from takes down the online or estate-agent advert for their home (the estate agent probably will not do this unless you force them to). In Scotland an offer being accepted is legally binding, sometimes subject to a mortgage being approved, so you are unlikely to be gazumped, or pull out once you have put your offer in.
Your bank will carry out affordability and credit-score checks and then, with a mortgage-valuation survey, on the property you want to buy. This survey is not the same as a building survey, which checks whether the house is in good condition. You need to set this up yourself.
Meanwhile your solicitor will be carrying out checks too, on things like whether your property is on a floodplain. You have to pay for these. Press your solicitor for these to be completed quickly.
When you have received your mortgage offer and your solicitor is ready you can exchange contracts, a process carried out between your own and the seller’s solicitor. At this stage you normally need to pay 10 per cent – sometimes, if you negotiate, 5 per cent – of the price of the property you are buying to your solicitor, who passes it on to the seller’s solicitor. Make sure you have this money ready to be transferred out of your bank account; some banks will require a few days’ notice.
Be super-careful about the accuracy of your solicitor’s bank details. There is a common fraud where solicitors’ email accounts are hacked by a fraudster who sends out an email to a buyer stating that the solicitor’s bank details have changed, or adding in false sort codes and account numbers. If in any doubt, call your solicitor to check again where you send the money. Once you’ve clicked send it’s gone, and you cannot get it back if you send it to the wrong place. I’ve seen this happen several times, and it is heartbreaking.
You also need, at this stage, to arrange buildings insurance, legally required as part of receiving a mortgage.
You agree a day of completion, on which you arrange to send over the rest of your home deposit, plus any fees owed to your solicitor, as well as stamp duty. Your solicitor will receive cash from your mortgage company and arrange to send this to the seller’s solicitor on completion day, at which point you receive the keys for your new home. Woohoo!
The many other costs of buying a house
When working out whether you can afford to buy you need to budget for all the many other unexpected costs that crop up along the way: stamp duty, legal costs, local authority searches, survey costs, mortgage arrangement fees, mortgage broker fees, buildings insurance, removal vans, and, only if you are selling too, estate-agency fees.
Need-to-knows: Stamp duty
This is the biggest cost of moving, a tax you pay on any property you buy in the UK. The tax is based on the price of the property you are buying, and is staggered in thresholds. For example, you pay 2 per cent of a property’s value on properties priced between £125,001 and £250,000; 5 per cent on properties worth between £250,001 and £925,000; 10 per cent on properties worth £925,001 to £1.5 million.
First-time buyers are exempt from paying stamp duty on any home worth below £300,000. If the property you want to buy is worth more than £300,000 but less than £500,000 you pay 5 per cent of any proportion between the two.
If you are buying with another person you both have to be first-time buyers, otherwise it does not count. There is an exception if only one person’s name is on the deeds, and that person is a first-time buyer, but only if you are not married. You are not a first-time buyer if you have already owned a property in another country, or if you have inherited a property. You also only get the exemption if you are buying a home to live in. It does not apply to buy to let, even if you have never bought a property before.
Conveyancing
You need a property solicitor or conveyancer
