Applying for a mortgage before full deposit saved?

ryanm8655

Hi there,

In short, I am wanting to know whether I can apply for a mortgage and get it approved before I have saved the full deposit? I am looking at 90% LTV.

I have a broker on hand who has said it shouldn't be a problem as long as I know I can save it but this contradicts what google says? It's a free broker who gets his commission from the mortgage provider rather than me but they've been very helpful.

I will have the full deposit in a couple of months (I am about 5K short depending on what I can get the property I like for). I'm living with family at the moment and have a fairly good salary hence can save quickly. Unfortunately my car went kaputt, hence bought a car from a family member that I've been paying over the past couple of months, or I'd have saved more. I have one payment left and then can hit the saving hard.

Do I just wait a couple of months and risk missing out?

Thanks,
Ryan

Hoenir

Missing out on what?  You've cheap living currently. Make the most of it. A mortgage is like having a bll and chain around your ankle. No harm in having money spare to pay for unexpected costs when you finally move in. 

ryanm8655

Hoenir said:

Missing out on what?  You've cheap living currently. Make the most of it. A mortgage is like having a bll and chain around your ankle. No harm in having money spare to pay for unexpected costs when you finally move in. 

The place I want - I have very specific requirements that mean I can only buy bungalows and I am also quite particular about location so it may be sometime before another becomes available if this one was to sell. But a good point. I guess more will come up eventually.

DullGreyGuy

ryanm8655 said:

In short, I am wanting to know whether I can apply for a mortgage and get it approved before I have saved the full deposit? I am looking at 10% LTV.

I have a broker on hand who has said it shouldn't be a problem as long as I know I can save it but this contradicts what google says? It's a free broker who gets his commission from the mortgage provider rather than me but they've been very helpful.

I will have the full deposit in a couple of months (I am about 5K short depending on what I can get the property I like for). I'm living with family at the moment and have a fairly good salary hence can save quickly. Unfortunately my car went kaputt, hence bought a car from a family member that I've been paying over the past couple of months, or I'd have saved more. I have one payment left and then can hit the saving hard.

Do I just wait a couple of months and risk missing out?

10% LTV (ie 90% deposit) or 90% LTVE with a 10% deposit? 

You dont apply for the mortgage straight away, you ask for a decision in principle, which they won't ask for evidence of the deposit for, and later in the process apply for the mortgage. 

We didnt have the deposit in our account at the time of having an offer accepted but had a plan to finish saving for it. Remember however it's not just the deposit, you have to be able to pay the fees for conveyancing and, if applicable, the stamp duty. 

ryanm8655

DullGreyGuy said:

ryanm8655 said:

In short, I am wanting to know whether I can apply for a mortgage and get it approved before I have saved the full deposit? I am looking at 10% LTV.

I have a broker on hand who has said it shouldn't be a problem as long as I know I can save it but this contradicts what google says? It's a free broker who gets his commission from the mortgage provider rather than me but they've been very helpful.

I will have the full deposit in a couple of months (I am about 5K short depending on what I can get the property I like for). I'm living with family at the moment and have a fairly good salary hence can save quickly. Unfortunately my car went kaputt, hence bought a car from a family member that I've been paying over the past couple of months, or I'd have saved more. I have one payment left and then can hit the saving hard.

Do I just wait a couple of months and risk missing out?

10% LTV (ie 90% deposit) or 90% LTVE with a 10% deposit? 

You dont apply for the mortgage straight away, you ask for a decision in principle, which they won't ask for evidence of the deposit for, and later in the process apply for the mortgage. 

We didnt have the deposit in our account at the time of having an offer accepted but had a plan to finish saving for it. Remember however it's not just the deposit, you have to be able to pay the fees for conveyancing and, if applicable, the stamp duty. 

Apologies - 90% LTV, so 10% deposit - typo and have now corrected.

I have a mortgage in principle but assumed I'd need to do the application as soon as I have an offer accepted?

Yes, have an idea of conveyancing and survey fees - no stamp duty as I'm a first time buyer and it's also sub £300k. they wouldn't take more than an additional month to save but also assume could stick on a credit card if they do demand immediate payment?

With my disposable income I should have the deposit and car paid off in 2 months and then would only need another month to have the other moving costs covered.

DullGreyGuy

ryanm8655 said:

I have a mortgage in principle but assumed I'd need to do the application as soon as I have an offer accepted?

No, you'd normally do your conveyancing checks/searches first before applying for the full mortgage otherwise you may be !!!!!! away the fees if the searches find its built directly on top of a mine shaft and actually the vendor doesn't have the right to sell it

ryanm8655

Ah - thanks - had no idea... I assumed you made sure you could get the mortgage and then do the conveyancing etc. Assumed you just do the survey and conveyancing before exchange. I need to do some more reading clearly.

Edit: This timeline says apply for the mortgage first? Process of buying a house: timeline – MoneySavingExpert

DullGreyGuy

ryanm8655 said:

Ah - thanks - had no idea... I assumed you made sure you could get the mortgage and then do the conveyancing etc. Assumed you just do the survey and conveyancing before exchange. I need to do some more reading clearly.

Edit: This timeline says apply for the mortgage first? Process of buying a house: timeline – MoneySavingExpert

There is an element of the two going side by side but the bank won't issue the mortgage until all the searches etc are complete. Just look at the number of cases on here of searches throwing up problems and the lender demanding indemnity insurance to be in place. 

ryanm8655

Ok thanks. In that case I could make the offer, start the legal process and then apply for the mortgage in April when I have the deposit without it materially impacting timelines.

firsttimebuyer29rp

Just to give you an idea as we’re FTB going through the process now.  

We put an offer in early Feb (a bit too early to be fair!). Estate agents asked to see proof of deposit which was just a screenshot of our savings account. 

We then started the conveyancing process off mid to late Feb and applied for a mortgage on 26th (which came back this week). 

During the conveyancing process they’ll ask to see source of funds (ie how you got the deposit) and a history of this. We’re still going through getting all the paperwork etc as ours was mostly inheritance. 

So the risks I see are:
1. If the EA ask to see proof of deposit (I’m not sure if every case is like ours)
2. If everything moves quickly, your source of funds could hold up the process depending on how quickly you can get the deposit saved 
3. You could leave yourself short on cash if you’re saving up until the last minute before you complete 

Saying that, it’s hypocritical of me as we put in an offer before we were actually ready as we loved the house. Sometimes you’ve just got to go for it 😊

Good luck!’ 

housebuyer143

Ok, so you don't need the whole deposit when your start, although the estate agent might ask for proof of funds and then it's up to them whether they accept your offer knowing you don't have it yet. 

Secondly, most people apply for the mortgage first because no way you want to pay for searches and surveys etc when the property could be undervalued or something is wrong with it and your lose all your money if you then can't proceed. Doing the mortgage first prevents you losing loads of money. They shouldn't ask you for proof of deposit as the bank don't care and they will issue the offer before any of the searches are done. 

Lastly, you can't pay stamp duty or conveyancing fees on credit card.- they just don't allow it, so do not rely on this. You also can't borrow it without declaring it and then the solicitor will require additional checks on that person. 

Is the house in a chain? If so, you probably have lots of time before you need to start anything as you will want to wait until the chain is complete before doing anything. If it's no chain, they will be expecting to complete probably before 3 months and you will hold it up without the money. 

This is all assuming you get your offer accepted. Bungalows tend to the popular and it might be the seller chooses someone in a more stable position from a buying perspective.