My Daughter Wants a House.

bri160356

My daughter and her husband live in rented accommodation and are looking to buy their first home.

They are both in their 20’s and have been in ‘secure’ employment for several years.

They have a combined income of about £70k p.a.

They could probably raise a deposit of approx £50k. (depends how generous ‘Bank of Dad’ is feeling!)

Do they ‘arrange’ for the mortgage ‘amount’ to be available first (if required) and then look for a house priced accordingly?

Or, do they work out how much they can afford by making general enquiries through the various lenders, and then set about looking for suitably priced properties and subsequent mortgage?

Is there a standard ‘procedure’ that can be followed?

Any good mortgage deals/providers out there that anyone can recommend?

All advice gratefully received. Thank you.

Ozzuk

They won't have any offers accepted without an agreement in principle for finance (if needed). For me, I'd be looking for the best mortgage deal, understanding what I could afford and then going shopping.

They can also get everything else in place, i.e. maybe check their credit files, make sure they have 3 (sometime 6 required) months worth of bank statements to hand, 3 months of payslips.

kingstreet

Talk to an independent mortgage broker to cover that part of the market and research direct products and lenders online. Use online affordability calculators to get a feel for the affordability models.

Start researching potentially suitable areas and get an idea of what's affordable in them. Start booking viewings and consider obtaining a mortgage agreement in principle before making offers.

Thrugelmir

bri160356 wrote: »

They have a combined income of about £70k p.a.

They could probably raise a deposit of approx £50k. (depends how generous ‘Bank of Dad’ is feeling!)

Suggest that they also get saving.

ACG

There are 2 ways to do it:
1) Speak to a broker get a general idea of what can be obtained and go from there.
2) Jump on the lenders websites and have a play around with the affordability calculators.

I would say, take those calculators with a pinch of salt, following the MMR changes in April some calculators do not include all the types of deductions you may come across so some will show higher figures than can actually be obtained... they should atleast give you a ball park figure but I would say stick to 4x or 4.5x income as a bit of a guesstimate.

If they have loans/HP etc or kids, that may come down.

bri160356

kingstreet wrote: »

Talk to an independent mortgage broker to cover that part of the market and research direct products and lenders online. Use online affordability calculators to get a feel for the affordability models.

Start researching potentially suitable areas and get an idea of what's affordable in them. Start booking viewings and consider obtaining a mortgage agreement in principle before making offers.

How does one obtain a ‘mortgage agreement in principle’; are there fees payable for doing that or is it just a service that ‘lenders’ offer.

Are they binding in any way and would there be cancellation fees if the ‘mortgage agreement in principle’ was declined at a later date?

ACG

An agreement in principle is not binding on you or the lender.

Its basically a credit check and a basic check of the information entered to check it fits the lenders criteria. It will always be subject to full underwriting, satisfactory evidence of info provided (bank statements, payslips etc).

There are no fees for this with any lenders as far as im aware.

bri160356

OP here; as the ‘Bank of Dad’ contribution will be a ‘gift’ not a 'loan’ it would appear that I need to sort out a ‘Deed/Declaration of Trust’.

Anyone have experience of this?

Does it necessarily need the services of a Solicitor?

ACG

A gift is a gift. You have to sign a document to say it is a gift you are not expecting it back and you will have no rights over the property.

Would a declaration of trust override that? Im not sure, but it may cost a bit for solicitors to decide if it went that far.

Keekles

With gifted deposits it varies lender to lender. In my experience those that I've dealt with have their own forms available just to confirm your details with standard text expressing you have no interest in the property.

You shouldn't require involvement of solicitors until an offer has been accepted and they are applying for their mortgage.

If you approach a broker, the Agreement In Principle should always be free. This will give an agreed loan amount which you then add your deposit to, and therefore ascertain a purchase price. Also consider fees etc. involved in the home buying process; before Bank of Dad has to cough up an extra few £k he wasn't expecting to.

An Agreement in Principle generally lasts 90 days - should be time enough to find a suitable property and proceed to full application. If not, you can consider a new AIP with the same / alternative lender depending on their needs and criteria.

Zoology_Dragon

Part of our deposit was gifted and we just needed a letter from the person providing the funds. You'll be told the exact wording needed.