FTB query about mortgage process

blargh

Hello there. FTB currently still in deposit saving mode, about 3/4 of the way there.

Ok, can someone explain this system to me please? In my head, before looking into how it all works, I always assumed that the process of getting a mortgage was something along the lines of:

1. Apply for and receive mortgage offer from bank
2. Start looking for properties
3. Make offer on suitable property based on the mortgage you've been offered from the bank

This just makes sense to me. Instead (correct me if I'm wrong please!) the reality seems to be:

1. Get utterly worthless agreement in principle that means nothing and is given to everyone as far as I can tell.
2. Spend whatever time/money it takes looking for a place, negotiating offers, paying fees etc.
3. Apply for and (maybe, maybe not) receive mortgage offer from bank.

Does nobody else see this as a flawed way of doing it? It makes so much more sense to me to apply for a mortgage first ('pre-arranged'? I've seen references to this elsewhere, e.g. Scotland, US) so you know you will actually be able to go through everything smoothly when you're looking at properties. Instead you can spend months on end going through all kinds of stress (and paying all kinds of fees) without any kind of assurance that you'll actually get the mortgage.

The 'agreement in principle' is a farce. All I've been hearing for the past couple of years is how incredibly strict banks are and nobody's lending etc. I received an AIP from HSBC yesterday in all of 0.003 seconds and all I did was type my income and the loan I was after. I can't believe they actually did a credit check after I gave them my details and nothing's showing up on my equifax to suggest they did a credit check. I've been googling and I haven't read about a single case of anybody NOT getting an agreement in principle, so I get the impression they're worthless and are handed out like sweets out of a pervert's van.

Do pre-arranged mortgages not exist in the UK at all? Time is a real premium for me and I can't stomach the idea of spending several months and lots of money house hunting, dealing with estate agents and solicitors, shaking hands with a vendor etc. when it could be declined at the last minute. I'd be perfectly happy to spend that much time and money however if the mortgage was already in place. Is there a logical reason behind doing things this way? I honestly don't understand it at all... Read hundreds of threads here and elsewhere about AIPs given and then declined later on when the actual application took place. Surely there must be an alternative for people like me who would rather house-hunt with the comfort of knowing the mortgage is in place?

Thanks in advance for any advice / clarification

GMS

An offer of mortgage will be made when the lender is satisfied with the applicant (you) and the security (the property) therefore you cannot get an offer before finding the house.

An agreement in principle is as good as the information provided to get one. If the lender does a full credit check then all good, if the applicant fails to declare information and/or exaggerate any part then the AIP will be useless.

Dave_Ham

For a first time buyer you have it spot on - although not sure on the perverts part..

The system is flawed and you forgot to add in the spot on job the Estate Agents do and how they make things easier.

This sounds biased, but get yourself a decent mortgage broker and they can manage this to shield you from the rest.

As one of the other brokers said the other day, I can tell a case that will go through and one that wont after a fact find. 90% of the time I am right, maybe 95%

Then swerve online solicitors for sale/purchases and a good solicitor can shield the rest...

blargh

GMS wrote: »

An offer of mortgage will be made when the lender is satisfied with the applicant (you) and the security (the property) therefore you cannot get an offer before finding the house.

Thanks a lot for the quick response GMS. Ok, so it's not just me but the property as well that they want to be happy with before agreeing to lend. I guess that explains why the process is the way round it is, thanks very much for clarifying! I still hate the idea of possible epic time wastage but I guess it makes sense at least now

How come it works the way I'd prefer it to in Scotland though? Scots have to have the mortgage in place before an offer is made, no?

blargh

Dave_Ham wrote: »

For a first time buyer you have it spot on - although not sure on the perverts part..

The system is flawed and you forgot to add in the spot on job the Estate Agents do and how they make things easier.

This sounds biased, but get yourself a decent mortgage broker and they can manage this to shield you from the rest.

As one of the other brokers said the other day, I can tell a case that will go through and one that wont after a fact find. 90% of the time I am right, maybe 95%

Then swerve online solicitors for sale/purchases and a good solicitor can shield the rest...

Cheers Dave. To be honest I've just spent the last couple of years saving and only very recently (as I can now see the finishing line deposit-wise) have I actually looked into mortgages. I just always envisaged using HSBC as I've been with them for 12 years and they know my financial history better than anybody. I get the impression everything will run a lot more smoothly with them since they know my entire financial history whereas an outsider would presumably want a ton of paperwork etc.

Could you please explain what you mean by 'shield' in your post? It sounds intriguing but I don't actually have a clue what you mean...

Thanks so much btw, so awesome to have a friendly and helpful forum like this

Dave_Ham

By shield I mean protect. So you wont find a client of mine on her saying how long does this take or waited 2 days and no decision, or broker cannot find a solution anyone got any ideas.

This is because I protect them and do the right things and in essence "hold their hand"

I try not let them see sight of the rubbish we deal with day to day and try to select a lender that I am confident they will achieve.

Not always best buy rates, but quite often not best sell clients...

Thrugelmir

blargh wrote: »

1. Get utterly worthless agreement in principle that means nothing and is given to everyone as far as I can tell.
2. Spend whatever time/money it takes looking for a place, negotiating offers, paying fees etc.
3. Apply for and (maybe, maybe not) receive mortgage offer from bank.

1. If you have not sinned in the past. Then an AIP should be a reasonable reflection of what you can borrow.

2. This is a home. Somewhere you may spend years. Would you buy the first holiday you see in a brochure?

3. As 1) above. Demonstrating good personal financial skills and an ability to save will sail you through the checks.

The majority of people do not encounter problems. They are the silent majority.

blargh

Thrugelmir wrote: »

1. If you have not sinned in the past. Then an AIP should be a reasonable reflection of what you can borrow.

2. This is a home. Somewhere you may spend years. Would you buy the first holiday you see in a brochure?

3. As 1) above. Demonstrating good personal financial skills and an ability to save will sail you through the checks.

The majority of people do not encounter problems. They are the silent majority.

Re: point 2 - I agree 100%; as I said I have no problem spending that much time and money looking for a home, my problem is that amount of time and money when there's no guarantee I'll even get the mortgage. I'm pretty sure my head would explode from the rage if I spent 6 months going through the all the motions only to get declined after an offer's been accepted...

I'll admit I may be being unnecessarily worried / paranoid here; the loan I'm planning on getting, even at a 5-year fixed rate, would result in monthly repayments that come to about 25% of my net income (I'm looking for a small studio flat, it's how I roll ), so laughably affordable. Also, apart from an infuriating mistake in my credit file re: electoral roll (flat number issue making it seem like I haven't been on the electoral roll when I have) which should be corrected soon, my credit report is an excellentfest in every category, never been late for any payments ever. I am however worried about the fact that I've lived at 6 different addresses in the past 9 years and I understand lenders find that concerning / suspicious (but if they had the flatmates/neighbours that I've had they would have moved out as well...). But yeah in terms of the essentials, i.e. my ability to pay back there's no reason I should get refused I think. But I've read so many stories on here of perfectly good candidates being declined at the last minute, I'd be enraged beyond belief if that happened to me!

GMS

Make sure you speak to any lender before application to ensure they are happy with a studio flat. Get the sq meterage from the agent as this may be required.

Do not part with any fees until the property has been agreed up front