• Residential Sales

Buyer Beware (And Seller Too!) – The Mortgage Process Isn’t Always Plain Sailing!

18 June 2014

Just as the property market in the North East is developing more of an appetite for selling, mortgage providers, quite rightly, have been asked to lend in a more responsible way.

As a result, more detail is being asked of the would-be purchaser at the mortgage application stage.  This is beginning to impact on the property conveyancing process, which has seen a massive upturn in activity since the beginning of the year, resulting in longer processing times which are causing frustration for buyers, sellers, solicitors and estate agents alike.

What can the would-be buyer do to help the purchase of their property?

1. Take early advice from an independent financial adviser or your existing lender.  Ask them what additional information they require in order for a successful mortgage application to be processed.  You may get a mortgage offer in principle, but that does not necessarily mean you will get a solid mortgage offer on the property of your choice due to the protocols now being adopted by mortgage lenders.  An extract at the end of this editorial, from a recent article by Richard Rutherford of Easby, Gale & Phillipson, clearly sets out the key steps to take.
2. Instruct a solicitor as soon as you have had your offer accepted.  Ask them for a list of information that you       will need to provide to them at each stage of the buying process and be prepared to react quickly.  Arrange an early meeting with your solicitor to ensure that you are clear about the process, what information you will have to provide and when, and what costs are involved.  Equally, your solicitor should tell you what he or she will be doing at each stage of the process.
3. Keep in regular contact with your IFA/lender.  Ask them when the mortgage valuation will be undertaken.  Who will be doing it? What the expected turnaround times will be and any likely fees required to be paid in a timely fashion?
4. Obtain insurance quotes for both the buildings and contents of your new house well in advance of exchange of contracts.  The lender will offer to provide insurance quotations for the building, but any homework you do beforehand will save time and, perhaps, money in sourcing the most appropriate cover.  It will also highlight any particular issues around the location of your new home, such as medium to high level flood risks, etc that your insurers will need to be informed about.
5. Appoint a chartered surveyor and/or building surveyor to undertake the relevant survey required in addition to a mortgage valuation (if required).  This may be in the form of a homebuyer survey or full structural survey.
6. Consider the impact of the survey.  What will it cost to remedy any problems revealed?  What are the priorities in undertaking  such work?  Discuss any relevant conclusions with your solicitor, lender and the estate agent involved as soon as possible, not at the last minute!

What can the seller do to be prepared?

1. Instruct a solicitor from the outset.  Check that the property has a registered title.  Believe it or not, properties without registered titles are still quite common, especially when older properties have been retained within families for several generations.  If your property is not registered, ask your solicitor to register the title at the earliest convenience.
2. Be transparent with your agent and your solicitor about any issues that you are aware of.  The Consumer Protection from Unfair Trading Regulations 2008 place a large onus of responsibility on the agent and seller to provide accurate information as soon as possible to any would-be purchaser in order for them to make an informed decision about the purchase or viewing of a property.  Experience dictates that these issues will come back to bite you in a sensitive area (if not the pocket)!
3. As the seller, you may also be a purchaser, too.  Whilst this involves double the work, be prepared for your onward purchase by following the steps and recommendations made above.
4. It goes without saying that the presentation of your home is key to successful viewings and a happy vendor.

TV programmes have made us all a bit more savvy about improving the saleability and kerb appeal of our houses.  The basic rule is to ensure that the property is clean, tidy and relatively uncluttered before being presented to the market.  It doesn’t have to be a show house; just warm, well lit and welcoming!

Tips to help speed up the mortgage process, from Richard Rutherford at Easby, Gale & Phillipson :

• Take advice.  We are quickly establishing which lenders to avoid, depending on client’s individual circumstances. A recent case that I worked on had one lender offering a mortgage of £156k based on their affordability criteria and another lender offering £230k!!
• Retain Bank Statements.  Lenders will require your bank statements to assess your spending patterns/disposable income. Most lenders require your last 3 months statements. Ideally the statements must show no overdrawn balances or that you keep within an agreed overdraft facility as a minimum. If you are saving towards a deposit ensure that it is referenced on your statements as ‘house deposit/house move’ etc. Very simply your statements must prove to a lender that your income exceeds your outgoings based on your spending patterns to be able to afford the mortgage payment but not just on the actual payment that you will be making but also on the basis of an increase in your payment. This is known as the stress test.
• Keep all payslips and P60’s particularly if you are in receipt of regular overtime, bonus etc. If these need to be used to secure your required mortgage the lenders will only consider taking them into account if they can see a history of regular payments. Lenders will assess on your net pay so will take into account deductions from salary as shown on payslips such as pension contributions, student loan payments, childcare vouchers, season tickets, parking etc. If you are in receipt of state benefits including child benefit, working tax/family tax credit, ensure that your bank statements confirms this and is backed up by your most recent confirmation of annual assessment/payment confirmation.
• Debt Management. Pay off as much debt as possible before applying as outstanding credit will have an impact on your affordability assessment.
• Electoral Roll. Ensure that you are on the voters roll and ideally try to keep addresses to no more than 3 during the 3 years prior to making an application. This will improve your credit score/rating.
• Credit Rating. Check your credit file to ensure that it displays no surprises. 
• Proof of your deposit. Lenders like to see a build – up of savings so have your savings book, bank/building society statement available to confirm this. If you are obtaining assistance from parents/grand – parents, you will need confirmation from them that any gift is for a house deposit, is non – refundable and that they require no interest in the property. Some lenders require proof of where the gifted funds are coming from. Tax advice should be obtained in respect to the gift.
• Up to date form of identification. Ensure passports and drivers licences are valid and up to date as these will be required to satisfy identification requirements. You should also have another form of proof of address such as the most recent council tax invoice, bank statement, utility bill etc.   For further information visit www.egpandp.co.uk

Chris Arundel, Director, GSC Grays tel; 01833 637000