

Answers to some common financial queries from first-time buyers

How do I apply for a mortgage and what documents do I need?

In England and Wales, you apply for a mortgage once you have had an offer on a property accepted. In Scotland, you must arrange your mortgage before you make an offer, as once the offer is accepted, it is legally binding.

To apply for a mortgage, you need to complete and submit an application form to your lender. You'll usually have to provide:

  • ID for each person applying
  • Proof of current address
  • Proof of income earnings for each applicant, such as payslips
  • Latest bank statements, normally the previous three months
  • Details of the property you are buying
  • Estate agent's and solicitor's details

How can I give myself the best chance of getting a mortgage?

You can give yourself the best chance by, firstly, making sure that you have a good credit rating. You can use a company such as Experian or Equifax to get hold of a copy of your credit report. If it reveals any issues, such as defaults on credit cards or bills, make sure you investigate them and get any errors rectified before you approach mortgage lenders.

Building up your deposit may involve drawing up a new 'austerity budget' for yourself (and your partner if you have one). You may need to cut back on unnecessary expenses so that you can put away as much as you can each month.

How much can I borrow?

The amount you can borrow generally depends on the amount of income you have. Many lenders also factor in any other payments you make to commitments such as loans or credit cards. Click here to see how much you might be able to borrow from HSBC.


How large a deposit will I need?

Most lenders will look for a minimum deposit of around 10% of the property purchase. Generally, the greater your deposit, the lower your Loan to Value (LTV) ratio. A lower LTV will allow you access to more competitive interest rates on your mortgage borrowing.

Loan to Value represents the value of the property which you are looking to borrow. For example, a £100,000 property with an £80,000 mortgage = an 80% LTV.

Is it best to go for a period property or a new build?

Older homes are often more solidly built, with higher-quality materials than new-build properties. However, some features such as sash windows and open fireplaces can be attractive to look at but expensive to maintain. They can also decrease energy efficiency, leading to higher fuel bills.

If you go for an older property, take account of the additional costs of maintaining it, and get a full survey done to check that wiring and pipework are in a good state of repair. You will need to factor into your budget the cost of any repairs and you could consider increasing your mortgage to pay for them.

If you opt for a new build, check the exact specifications, as these may be smaller than the showhome. You must also ensure that the property is protected by a good warranty. Most new homes are covered by the National House-Building Council (NHBC) 10-year Buildmark warranty and insurance. Also, be aware that some lenders require a larger deposit for newly built properties.

What happens if my purchase falls through?

Many property chains fall apart due to factors ranging from one of the parties failing to secure the finance they need to problems being uncovered in the survey. You can also lose your purchase if another buyer comes along after your offer has been accepted and offers a higher amount. There is unfortunately no protection against this practice, known as 'gazumping', in England and Wales. However, in Scotland, once an offer has been accepted, it is legally binding.

To lessen the chances of gazumping, ask for the property to be taken off the market as soon as your offer is accepted. It can also help to be flexible with the seller – don't quibble over minor points and make it clear you're willing to complete the purchase within their timescales. Above all, be nice to them – if you develop a good relationship, it will be harder for them to let you down.

If your purchase does fall through, it's disappointing and stressful. And it can hurt financially – you'll still be liable to pay for work your solicitor has already done and any survey that has been carried out. Some solicitors offer insurance against this, so you won't have to pay double the amount of fees. Remember to ask your solicitor at the outset if they offer this.

How long does the whole process take?

If everything goes smoothly, a typical house purchase takes 6-8 weeks to complete from when you submit the application. It varies between applications and is dependent on the circumstances and complexity of the case. The time it takes you to find a home can vary hugely, depending on how intensively you search and how quickly you decide on a property. Once you've made an offer, it can take around a week to conclude negotiations. It's a good idea to obtain an agreement in principle in advance, as this will speed up your mortgage application when you've found a property you want to buy.

Appointing a good solicitor can take a while so you might want to start your search at the same time as your property hunt. Once you've submitted your full mortgage application, the lender will arrange a property valuation. Timescales will vary.

Once you've reached the final stages of purchase, the time it takes to draw up and exchange contracts can vary enormously, depending on how smoothly things run. The process is likely to be quicker if there is no onward chain or if you are a cash buyer. But do bear in mind that each property purchase is different, so timescales can vary.

What is the difference between freehold and leasehold?

If you buy a freehold property, it means you own the building and the land it is situated on, and you will have the right to live there for as long as you like.

If you buy a leasehold property – common if you are buying a flat in a shared building – you are actually buying the rights to live in a property for a set period of time, but you won't actually own the property, or the grounds it is built on. It's important to find out how long is left on the lease, as this will affect the value of the property. You may have to pay ground rent or maintenance fees if you buy a leasehold property, so remember to factor this into your homebuying budget.

Who are the key people involved in the homebuying process and what are their roles?

Estate agents market properties to potential buyers and negotiate with them on behalf of their clients. Their role also involves valuing properties and comparing them to others on the market.

Mortgage lenders provide the financing to buy a home. You can get a mortgage – a homebuyer's loan – direct from banks, building societies or specialist mortgage lenders.

Solicitors are qualified to practise in any area of law but some may choose to become property specialists. They will check the contract and any legal documents associated with transferring a property from one owner to another.

Conveyancers have the same role as solicitors who specialise in property. The main difference is that they are only qualified to deal with property law. Conveyancers often cost less than solicitors, as they are only trained in this area.

Surveyors provide valuations and surveys of properties. There are different types of surveyors – from those who provide basic valuations on behalf of mortgage lenders, to those who carry out full structural surveys to highlight any defects in a property.

What are the implications if my mortgage application is rejected?

Having a mortgage application rejected is not the end of the world, but it can be useful to understand why you’ve been turned down. Getting a copy of your credit report will highlight any problems with your credit history.


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