Mortgage Process for BEGINNERS | How Does It All Work In The UK?

Hello and welcome back to our Challenge Podcast! My name is Gemma, and here at WIS, we talk about all things relating to money, mortgages, and positive money mindset.

Today, we’ll discuss the mortgage process for first-time buyers in 2022, including the steps you need to take and the checks you should do.

We have Ifthikar (Ifthi) joining us again — a trained accountant and mortgage broker with over 10 years of experience and one of the founding directors at WIS.

1. What is the Movember Mustache About?

Ifthi:

I’m growing this mustache for Movember, supporting men’s health charities, including prostate cancer.

If you’d like to donate, Gemma has a link to a video with all the information.

2. Where Do I Start as a First-Time Buyer?

Gemma: As a first-time buyer, you may wonder, what is the first step in getting a mortgage?

Ifthi:

The process starts with a consultation call with a broker or lender.

This is like an “icebreaker” to discuss:

• Your income details
• Your financial commitments
• Your credit profile

If everything looks positive, we move to the document check stage.

3. What Happens During the Document Check Stage?

Ifthi:

We conduct a Fact Find, gathering detailed information about your finances.

Documents we check include:

• Pay slips
• Bank statements
• Credit file (downloaded via our systems at no cost to you)

Purpose: Identify any potential issues before you start house hunting.

4. What is an Affordability Check?

Ifthi:

After reviewing your documents, we calculate how much you can afford to borrow.

Factors considered include:

• Regular financial commitments
• Expensive hobbies

Tools: Bank-provided affordability calculators to provide an accurate borrowing estimate.

5. How Does Market Research Work?

Ifthi:

Once we know your borrowing capacity, we research mortgage products.

Considerations:

• Interest rates vs. product fees
• Valuation fees

Outcome: A Key Facts Illustration (KFI) — a quotation showing the true cost of your mortgage.

Gemma: Online quotes may not reflect your specific circumstances, so it’s important to get advice.

6. What is an Agreement in Principle (AIP)?

Ifthi:

A soft credit check determines how much you can borrow in principle.

Advantages:

• Identifies potential issues before a full application
• Protects your credit score (hard searches can impact it)

Recommendation: Complete document checks before AIP to avoid deviations later.

Gemma: It’s best to understand your borrowing limit before starting your house search to avoid wasting time.

7. How Should I Approach Viewing a Property?

Ifthi:

Second viewing is recommended, ideally with someone experienced (like a landlord).

Tips:

• Check the property at different times of day
• Inspect carefully: cracks, structure, surroundings
• Note noise levels, nearby traffic, and community dynamics

8. How Do I Make an Offer?

Ifthi:

Include details in your offer, such as:

• Curtain poles
• Chandeliers
• White goods

Clarify what’s included to avoid additional costs later.

9. What Happens During the Mortgage Application?

Ifthi:

After offer acceptance, submit a formal mortgage application.

Banks may request updated bank statements if time has passed since your AIP.

Lenders review your application in detail.

10. What About Property Valuations?

Ifthi:

There are three types of valuations:

• Basic valuation (by the bank)
• Homebuyers survey
• Structural survey (recommended for older properties)

Choosing a full survey can prevent costly surprises later.

11. What Does the Mortgage Offer Mean?

Ifthi:

A formal document from the bank stating they will lend to you.

May include special conditions.

Binding as long as your circumstances remain unchanged.

12. What Insurance Checks Are Required?

Ifthi:

Types of insurance:

• Life insurance
• Critical illness cover
• Accident cover
• Home insurance (mandatory at exchange of contracts)

Purpose: Protect your family if unforeseen events occur.

Tip: Start early, especially if medical conditions exist, as underwriting may take time.

13. What is Exchanging Contracts?

Ifthi:

Point of no return: usually involves paying your deposit.

Buyer and seller exchange contracts, agreeing on completion date.

Consider:

• Insurance must be in place
• Circumstances must remain stable

For new builds, exchange and completion may be months apart.

Gemma: Some lenders offer extended mortgage offers, but there’s no guarantee — always confirm with your lender.

Final Notes

Gemma:

These points may not apply to everyone. Speak to an advisor if unsure.

Mortgage reminder: A mortgage is secured against your home, and non-payment may lead to repossession.