When it comes to buying a house timing is key. So, at what point in the timeline should you consider applying for your mortgage? Darren Polson explains both when and how first-time buyers should start the process
The Question
I have a very basic question about mortgages – excuse me if the answer is blindingly obvious! But at what point should my girlfriend and I make our mortgage application?
We have started viewing properties and yesterday the estate agent asked us if we had our mortgage in place! I hadn’t even considered this, so I blagged it and made out we were applying now.
Should we abandon the search and apply for the mortgage first? Who do we need to contact – is it our bank?
Darren’s Answer
Don’t worry, we are often asked this question.
The first step to take is to obtain a Decision in Principle (DIP) from a mortgage broker, which is an indication of how much you can borrow. Sometimes a DIP is also called an Agreement in Principle or a Mortgage in Principle.
The advantage of this is it will allow you to narrow your search in line with your price range and give you confidence that you can make an offer on the property.
It is important to factor in all costs associated with buying a property, such as the level of deposit required and legal costs.
Ideally, you would have a DIP in place prior to viewing properties. This is for your benefit as the last thing you want is to fall in love with your dream home and later find out that you cannot obtain the mortgage to purchase!
DIPs are valid for a certain period of time, which means you may need to refresh this. Many lenders range from 60 to 90 days. During this time, be mindful that the amount you can borrow takes in to account your income and outgoings; if these change, the amount you can borrow will change.
We have sometimes seen clients obtain a DIP then purchase a new car with a loan. Then when they come back to apply for a mortgage, they discover the amount they can borrow is significantly less than before!
If your circumstances do change, contact your broker who can provide updated information.
Please note, many estate agents and builders will say you have to speak to their in-house mortgage adviser. While this may be true, remember that you have no obligation to proceed with them. You are entitled to seek advice from wherever you like for your mortgage.
In conclusion, there’s definitely no need to abandon the search! But based on the above, we recommend speaking to a broker who can guide you through the process from start to finish.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
