First-time buyer mortgages

The order things happen in

A first purchase runs in a sequence, and most of the anxiety we hear comes from people who think they are at a later stage than they are. In broad terms: you work out what you can borrow and what you can afford, you get an agreement in principle, you view and make an offer, the offer is accepted, you instruct a solicitor, we submit the full mortgage application, the lender values the property, the lender issues an offer, your solicitor completes their enquiries, you exchange contracts, and then you complete and get the keys.

Two of those stages carry almost all the risk: the full application, where the paperwork either supports what you told us or does not, and the valuation, where the lender forms its own view of the property. Everything before that is preparation.

The process described on this page is the one used in England and Wales. Scotland and Northern Ireland work differently — in Scotland in particular the point at which the deal becomes binding comes earlier, so if you are buying there, tell us at the start and we will talk you through the differences that matter.

What an agreement in principle is, and what it is not

An agreement in principle, sometimes called a decision in principle or a mortgage in principle, is a lender's indication that on the information given, and on a credit search, it would be prepared to lend around a certain amount. Estate agents ask for one before they will take an offer seriously, which is why it is worth having before you view.

What it is not: it is not a mortgage offer. No payslip has been read, no bank statement has been checked, no property has been valued and no underwriter has looked at the case. It is a filter, not a decision. An agreement in principle can be followed by a decline once the documents arrive, and it says nothing at all about whether the lender will accept the specific flat you are about to offer on.

Agreement in principle

An agreement in principle is not a mortgage offer. Buyers lose properties because they treated it as one — they offer above what the paperwork will actually support, and the case collapses weeks later when the sellers have already stopped taking viewings.

This is why we would rather look at your documents before you make an offer than after. It takes an evening of your time and it is the difference between a considered offer and a hopeful one.

What a lender actually assesses

Lenders are answering three separate questions, and it helps to keep them apart in your head.

Can you afford it?

Affordability is not one number applied across the market. Each lender has its own calculation, its own view of how much of your income counts, and its own assumptions about future interest rates. Bonus, commission, overtime, shift allowance, a second job, self-employed profit, dividends and income paid in a foreign currency are all treated differently from one lender to the next. So are your outgoings — childcare, a car finance agreement, a student loan, credit card balances and the level of committed spending on your statements.

The cases we see most often are people who have been told by one lender's online calculator that they cannot borrow enough, when a different lender assessing the same income arrives somewhere quite different. Nothing has changed except the arithmetic.

Are you a reliable borrower?

The lender will look at your credit file. Missed payments, a default, a payday loan, a recent change of address history that does not tie up, or an account you had forgotten about all have an effect, and the effect varies enormously by lender. It is worth pulling your own credit report before we start rather than discovering a surprise mid-application.

Is the property acceptable security?

This is the question buyers never think about. The lender is lending against the flat or house, not only to you. Construction type, a short lease, a flat above a shop or a takeaway, ex-local-authority high-rise, cladding paperwork, a flying freehold, knotweed in the garden, or an unusually small studio can all narrow the list of lenders willing to proceed or end that lender's interest entirely.

The deposit, and gifted deposits

How much deposit you need depends on the lender, the property, your income profile and your credit history, and it changes as lender appetite changes. Anyone quoting you a single percentage without knowing which property you are buying is guessing. What is consistent is that a larger deposit widens the choice of lender and generally improves the pricing available to you.

Gifted deposits. Money from parents or grandparents is extremely common and entirely acceptable to lenders, but only with the right paperwork. Expect the lender to want a signed letter from each person giving money confirming the amount, that it is a gift and not a loan, that no interest is payable, that they will have no interest in or charge over the property, and that they are aware they will not get the money back. Your solicitor will separately need identification for the giver and evidence of where the money came from, under anti-money-laundering rules.

• A gift letter signed by every person contributing, not one letter covering a couple loosely
• Identification and proof of address for each giver
• Bank statements showing the money accumulating or arriving, and an explanation of any large credit
• Where money has come from overseas, more evidence than you expect and more time than you expect
• Where the gift is genuinely a loan, say so — presenting a loan as a gift is a serious problem, and there are lenders who will consider a family loan properly declared

Where money is coming from abroad, start early. Source-of-funds enquiries on international transfers are the single most common reason a first purchase runs late in our experience, and no amount of chasing at the end speeds them up.

The costs beyond the deposit

Buyers budget for the deposit and are then caught by the rest. We would rather you knew the list now, and we will help you build a real figure for your purchase before you commit.

• Stamp duty land tax where it applies — the rules and reliefs for first-time buyers change, so we will point you to the current position rather than quote a figure
• Conveyancing fees and the disbursements your solicitor pays on your behalf, including searches and land registry costs
• A survey. The lender's valuation is for the lender, not for you. A homebuyer report or building survey is a separate cost and a separate decision
• Lender fees, where the product carries them. Some can be added to the loan, which costs more overall because you pay interest on them
• Our advice fee, disclosed in writing before you apply
• Leasehold costs — ground rent, service charge, and the notice and registration fees the freeholder or managing agent charges on a sale
• Moving costs, and the deposit-shaped gap between paying out and getting your rental deposit back

Between offer accepted and completion

Once your offer is accepted, we submit the full application with your documents. The lender underwrites the case, instructs a valuation and, if satisfied, issues a formal mortgage offer to you and to your solicitor. In parallel your solicitor raises enquiries with the seller's solicitor, reviews the lease if there is one, carries out searches and reports to you.

Exchange of contracts is the moment the purchase becomes binding. Completion is when the money moves and you get the keys. Both dates are agreed between the parties, and we will be honest with you: the timetable depends on the slowest party in the chain, not on how quickly your mortgage was arranged.

Buildings insurance. On a freehold house you are responsible for the building from exchange, and the lender will require buildings insurance to be in place from that date. On a leasehold flat the freeholder normally insures the building through the service charge, and you arrange contents insurance only — your solicitor will confirm the position from the lease. Do not buy a buildings policy on a flat because a checklist told you to.

Why an offer can still fall over at valuation

A mortgage offer depends on the valuation supporting the loan. The valuer is acting for the lender, and there are several ways their report can change the picture.

• A down valuation: the valuer does not support the price you agreed, so the lender will lend against the lower figure and you must find the difference, renegotiate, or walk away
• A retention: part of the loan is held back until specified works are completed, which means you need the money to do the works before you receive it
• A request for a specialist report — structural, damp and timber, roof, drains, or an arboricultural report where there is knotweed
• A comment about construction type, cladding, a short lease or a flying freehold that takes the property outside that lender's criteria
• An unacceptable property: some flats above commercial premises, some high-rise blocks, and some construction types are simply not for that lender

None of these ends a purchase by itself. What matters is whether the case is then taken to a lender whose criteria already accommodate what the valuer said, rather than resubmitted hopefully somewhere similar. Repeated applications leave repeated searches on your credit file and cost weeks, which is why the second attempt should be a considered one.

What we charge

Our fee is typically £495, though complexity moves it, and it is always disclosed in writing before you apply. Each stage of the fee is earned when that stage is reached and is not refundable after that point. Separately, you have the right to cancel within 14 days, as set out in our Terms of Business. We are usually also paid a procuration fee by the lender.