At what point do you apply for a mortgage in principle?

dantheman2010

Hi all,

We are currently living with my partners parents after moving back in with them to save for a deposit to buy a house and ideally want to be out as soon as we can.

We should have the 5% deposit by end of June next year and the following month we would have enough to cover all of the first months bills so be able to move in say 1st August. Obviously the house purchase process can be a lengthy one from say 6-10 weeks. If we estimate the process to take 8 weeks we would like to start looking at properties in May and if we find the ideal house make an offer and get the ball rolling at the end of May to move in by end July/beginning of August.

We really dont want to be staying with the in-laws past end of July and wanted to get the process going in May in order to be out by then (mortgage acceptance depending).

I understand it is recommended to have a mortgage in principle when making an offer on a property and given we wont actually have to hand over any money until the point of exchange would the mortgage company still consider our application if at that point we dont have the full 5% but would do before exchange? We would probably have by end of May £7k of the £8k deposit needed (going for a 95% Help to Buy Mortgage Guarantee scheme, if accepted).

Thanks

Leon_W

There is nothing stopping you from doing it now.

It is only an agreement in principle so not binding. It may leave a search on your credit file but will give you an indication if a lender is willing to lend. At least if you do it now and get turned down you have plenty of time to try and find out why and rectify it.

dantheman2010

Is there any terms of the new scheme? i.e. do you have to have been mortgage free for a set time before applying to be classed as a first time buyer? I just sold a house a month ago and now live with the inlaws whilst we save.

I also need to wait for some of my credit accounts to be shown as settled on my credit report. Still waiting for C&G mortgage and Barclays credit card to show £0 balance and settled and closed accounts.

Finally, if I want the Help to Buy II scheme am I not best to wait until the New Year when Lloyds and some others join in and see what their interest rates are going to be? How long do the agreements in principle last? If I did in Jan and got accepted then would it last until May/June when I want to actually start the proper purchase process?

Thanks

Leon_W

An agreement in principle lasts, on average, only 30 days so it's likely that another credit check nearer the time would have to be done anyway.

I didn't know you still had a mortgage on your credit file. Wait for this to clear. Once you are in a position where your financials are unlikely to change (apart from the deposit saving) you could go for an AIP then.

Help to Buy II is open to anyone and not just FTB's, and like you say, there may be more choice in the new year.

dantheman2010

Hi thanks for this.

Yes I would assume C&G will update my credit file shortly. Am I now an FTB as I dont own a property or does that only apply after a space of time from owning a house?

Thanks

dantheman2010

One more thing, if it only lasts 30 days and I am accepted obviously I wouldnt be in a position to continue with the process until end of May so would need another credit search.

If I was rejected now there shouldnt be any reason which could be resolved by May i.e. we have no missed payments, no unpaid debt, infact we settled all credit accounts last month, we have no CCJs. So if we were to be rejected in May I doubt it would have been for any reason that we could have made a difference with now.

I would put it down to being rejected on affordability under the financial stress test for this new scheme.

I am just wondering what benefit applying now (or in the New Year) would be?

Leon_W

You are not a FTB as you have previously owned a home. It makes no difference anyway as Help to Buy is open to all.