A very confused FTB

cs90

Hi everyone.


Myself and OH are looking to buy our first home. We are both under 25. I currently earn ~£20k pa. OH is not yet earning although she has been offered and has accepted her first teaching job after graduating and will be on the books from July earning £22k ish.


We thought it may be a good idea to start looking around for a home to get an idea of prices and what we can get for our money etc, etc.


We spotted a house and rang up the estate agent to arrange a viewing. They basically threw a lot of information at us and we gave a lot of details over. They said they do not think we can view this house tomorrow (open house day) as it may be fully booked. But they have asked us to come in next week to sign an 'agreement in principle'.


Now I do not know enough about this to start signing my name to things. Am I right in thinking there isn't much point signing one of these if OH isn't yet in work? I've also seen it can damage your credit rating? (can anyone clear up what an AIP is exactly?)


It's left us a bit bamboozled and quite frankly already putting us off from trying to go out and look at houses! I hope someone can clear this up for me and maybe go through the first stages/process of attempting to buy a first home.


Many thanks

HouseBuyer77

MSE has some guides you could look at:

http://www.moneysavingexpert.com/mortgages/house-buying-guide
http://www.moneysavingexpert.com/mortgages/mortgage-guide

An 'agreement in principle' is a statement from a mortgage lender that they may be prepared to lend you up to a certain amount of money. Getting one involves a credit check, though it leaves a 'soft-print' in your credit file so nothing major to worry about it.

Many estate agents will want to see one of these when you place an offer on the house to demonstrate you can afford it. However as it's only 'in principle' there's many reasons you might still fail to get a mortgage.

If they're offering to do one for you this means they have an in-house mortgage broker. Don't use them, if you do wish to use a broker find a good independent whole of market broker.

The broker will asses you financial status and tell you how much you'll be able to borrow and then help you through the mortgage application, they do however cost money and there's no requirement to have one. If you're finding the process a little overwhelming a good broker may be very useful for you.

I'd suggest reading the MSE guide to mortgages linked above then using one of the many online mortgage tools to see how much you could borrow and then from then work out if you're happy with how everything works or want some guidance, in which case go find a decent broker.

Waiting for your OH to be in work will double the amount of money you can borrow (you'll only get a mortgage based upon current income, not potential) so probably worth doing.

elsien

The estate agent like the idea of AIP's because they like to know whether you can afford the house you're looking at. So you may find them trying to use it to weed out people who aren't serious or in a position to buy at this stage. I think it may in part depend on how keen the seller is to sell quickly and how much interest there is in a property as to whether you'll get your foot in the door without one.
Doesn't mean you shouldn't start looking round, but you might not be able to look at everything. I was refused a viewing in when I was looking round to see what I'd get for my money to move up the ladder because my house wasn't on the market. It wasn't on the market because I didn't know at that point whether I even wanted to move. I understand sellers reasons, but it can be frustrating when you're just starting to work out whether you can afford what you want, and what you get for your money.

Rosetinted

cs90 wrote: »

But they have asked us to come in next week to sign an 'agreement in principle'.

There is no signing involved with an agreement in principle and I definitely wouldn't go to an estate agent to get one. You should shop around online to get an idea of some of the different mortgage rates and types available (tracker, fixed term, discount, variable rate, capped rate, etc.).

Another good route, especially if you're new to all this, is to go to an independent mortgage broker who can offer mortgages from the full market (not brokers tied in with an estate agent, who are often limited to a smaller number of lenders) and get some decent advice to suit your personal circumstances. You can find brokers who don't charge a fee unless you take out a mortgage through them or don't charge you at all (they are paid through commission from the lender).

Because your partner isn't actually earning yet, it seems pointless to move ahead with an AIP, as it can't reflect imagined future earnings, just current ones. You don't have to produce documentation to prove what you say you're earning at the AIP stage, but it'd be easier to actually know what your total income is, surely? A word of caution - most lenders won't give you a mortgage until you're stable in your job and have been there for a certain amount of time, so I doubt you'll be able to instantly get one when your partner starts work.

Also, you don't mention a deposit at all. Have you started saving for one? It can take anything from months to years to save that up, depending how much you're aiming for. A larger deposit is, of course, better because you get much more favourable mortgage rates.

Malmo

Do not place your faith in what estate agents tell you. They do not work in your best interests and they act for the vendor / seller, who pays their fee.

As said, find a good whole of market mortgage broker who will hand hold you through the process. Avoid brokers based in estate agents.

Have a read of this MSE article which describes a simplified timeline and milestones of the buying process. It doesn't really factor in the complexities of a chain and the impact of that on the end to end process, but it is still useful as a guide.

Here is also a MSE guide that refers to the likely buying fees & costs to factor in and when they may be due.

Generally, the lower the Loan-To-Value ratio (LTV), in other words, the mortgage amount as a percentage of the agreed purchase price or surveyor's valuation (whichever is lower), the better the consumer terms, such as interest rate. So a LTV of say 65% (where you provide the remaining 35% as deposit) on a mortgage product would have better terms than a LTV of 95% (where you only provide 5% as deposit). The term (duration) of the mortgage also significantly affects the total interest you repay over the full term.

As well as the above, I'd also urge you to take the time to thoroughly review your credit files/reports from all 3 Credit Reference Agencies (Experian, Equifax, Callcredit/Noddle).

I've read countless threads here where posters haven't done this in preparation ahead of time and have had problems either obtaining a mortgage agreement / decision in principle (AIP / DIP - they're the same thing) or have been refused at full application or underwriting.

Take a look at this post for what you should do.

Malmo

HouseBuyer77 wrote: »

An 'agreement in principle' is a statement from a mortgage lender that they may be prepared to lend you up to a certain amount of money. Getting one involves a credit check, though it leaves a 'soft-print' in your credit file so nothing major to worry about it.

Not quite. All lenders will credit search you but whether this leaves a "soft" (not visible to other lenders) or "hard" (visible to other lenders who can then infer your 12 month historical application activity) search footprint on file depends on the lender. For example, Halifax do a soft search but Santander do a hard search. There is also a distinction around whether or not a lender automatically scores you. A small handful of lenders don't automatically score applicants but still review your credit profile history.

cs90

Appreciate all the info guys, will check out links posted. We have managed to gather a £60,000 deposit, however I imagine after fees that may be closer to 50 unless we manage to save a bit more before going ahead with a property.


We still have a lot to learn and I wouldn't feel comfortable moving forward in this process now until I have read up on a lot of what has been posted by everyone.


Would a deposit such as ours favour us when it comes to OH only being in a job for a few months? Or would they still like a certain history of job security? Also, would it then be best to cancel this meeting with their in house broker and go and find one ourselves when OH is working?


The estate agent was very patronising on the phone and reeling off so much information, just put us off from the get go!

alias69

As a first time buyer you have very little to offer an estate agent - so they are trying to 'qualify' you as a genuine prospect. Unfortunately this results in them using underhand techniques and assuming your lack of knowledge to hand over far more information than you are required to do.

As others have said, generally speaking its best not to use an in-house broker - especially if that is the agency the property you wish to purchase. At the very least you should consider speaking to a 'whole of market' broker that is not directly linked to the agency.

Once you have an AIP, which is an agreement in principle from a mortgage lender, if the agent asks for proof - you do not need to give this to them. This effectively shows your hand in terms of budget, and they will know if they can squeeze a bit more out of you. Just ask the broker to calle agency on your behalf and they can confirm that in principle you are proceedable at the offer you make (whatever that is).

MisterB1959

you don't come acroos as being stupid, so do your own research on the many sites available to give you an indication of what you could afford in the future. personally I wouldn't bother going to get an agreement in principle as unless you are actually going ahead with a purchase there isn't much point.