When You Are Buying A Property Your Biggest Fear Is That Your Property Purchase Will Fall Through. Here Are The 5 Most Common Reasons Your Purchase Will Fall Through And How To Stop It Happening.
1) You Don’t Have A Big Enough Deposit
Getting together the deposit for a house purchase is a big deal, especially with the huge increases in property prices in London and the south-east that we have seen over the last 20 years. The age of the average first-time buyer is now over 30 and the amount of deposit required continues to rise, not helped by the additional costs involved in buying a property including the cost of the stamp duty. No surprise then, that the potential house buyer can fall at the first hurdle by simply not having enough deposit.
Make use of one of the Government’s Help to buy schemes
The Government is making an effort to help first-time buyers and the help to buy schemes are their main weapons in the fight against a reduction in home ownership. There is the basic help to buy option where a 5% deposit will get you a mortgage underwritten by the UK government so that the lenders are willing to take the risk of lending with only a small contribution from yourself. Another alternative is the help to buy Equity Loan scheme; with this option the government provides a 5-year interest-free loan of 20% of the property value together with your 5% deposit, providing you with an effective 25% initial deposit.
Save using a help to buy ISA
The help to buy ISA allows first-time buyers to save up and obtain a bonus of up to 25% from the Government. There are some restrictions on who is eligible. For example, they are only available to first-time buyers under the age of 40 and there are limits on how much you can save and how the money is taken (it can only be accessed through a solicitor, ensuring that the funds are used for a house purchase rather than for any other means) but using this facility will give you up to £3,000 of additional savings towards your new home, courtesy of HM Government.
Access The Bank Of Mum and Dad
With spiralling house prices, the only option for many first time buyers is to beg and borrow from mum and dad. Most lenders will allow gifts from close family members to be used for the deposit although they will normally expect those gifting the money to waive any rights to the proceeds of the sale of the property, normally via a letter from your parents to confirm they are happy to do so.
Use the Barclays Family Springboard mortgage
100% mortgages disappeared with the credit crunch but there is still a way of obtaining a mortgage with no deposit by using the Barclays Family Springboard mortgage. This allows first-time buyers to obtain a mortgage provided their parents can place 10% of the property value in a savings account with Barclays, during which time the borrower is charged a fixed rate on their mortgage with a maximum mortgage (subject to affordability) of £500,000 being provided by the bank.
2) The Mortgage Is Not Affordable.
The average property price in London is now 30 X that of the average income. No surprise then, that so many house purchases fall through simply because the buyer fails the mortgage lender’s affordability assessment.
Use The lender’s affordability calculator
Most lenders will include an affordability calculator which will allow you to confirm the maximum borrowing capacity based upon your income. This can be used to give yourself a good idea of how much of a mortgage the lender will be willing to give you. Please note that the affordability calculator does not take credit score into account so is a general guide only.
Use All Forms Of Allowable Income
Ensure that you include all forms of allowable income. This could include overtime, bonuses, child benefit, maintenance payments, working tax credits, pension income, car allowance and rental income profit as well as many other forms of allowable income which will increase the amount of mortgage you can borrow.
If you have the ability to do overtime and are willing to wait three months before you obtain a mortgage then increase your overtime. Some lenders, such as NatWest will take 100% of overtime as mortgageable income provided you can provide three payslips showing the overtime being paid.
Ensure you have submitted your company accounts
If you are self-employed or run your own Ltd company then ensure that you are up to date with your accounts. Most lenders will not allow accounts to be used if they are longer than 15 months past the date of your business year end so you will need to have your most recent accounts finalised.
If you are a contractor work from your contractual rate
If you run a Ltd company but earn your money by being contracted to individual companies for fixed periods then speak to Halifax or Clydesdale who will potentially give you a mortgage based upon your contractual rate, provided your rate is equivalent to £500 per day. If your rate is less than this then you can still potentially have a mortgage based on your contractual rate if you speak to Metro Bank.
Age 50 + – Speak to Santander
If you are over the age of 50 then your affordability is going to be affected by your age as most lenders will only give you a mortgage until age 70 unless you can provide proof of significant retirement provision. The reasoning for this is that the shorter the mortgage term, the more expensive the monthly repayments. If you are over the age of 50 you may be able to obtain a bigger mortgage by speaking to Santander who will allow the mortgage term to run until age 75, particularly for occupations which do not involve manual labour.
Speak to a mortgage advisor
Obtain advice from an independent mortgage advisor in order to get the maximum loan possible. Each lender has a different policy when it comes to affordability. The types of allowable income, the mortgage term, how they treat overtime or bonuses, accepting maintenance payments or child benefit or rental profit, each lender has a different policy and only by speaking to an experienced mortgage broker will you be able to choose the best lender based on your individual circumstances.
3) Your Credit Score Is Poor
Time and time again, purchases fall through because the buyer cannot obtain a mortgage due to a low credit score. What is surprising is that quite often the person with the poor credit had absolutely no idea that the bad credit existed. There are, however, ways of ensuring that your credit is good and your ability to obtain a mortgage is not affected.
Don’t miss any credit payments
Well obviously duh! But really, this is the number one solution and you can ensure that this happens by setting up standing orders so that you don’t forget a credit card or loan repayment. Sign up to a credit tracker facility such as the credit monitoring facility with Experian so that you are notified about any changes which could affect your credit score.
Be careful when you move house or change mobile phone provider
The most common credit problems are not caused by major bankruptcies or disasters but by people moving home and forgetting to inform utility providers of the new address or by changing mobile phone providers and not realising that there is an unpaid balance on the old contract. Be sure to check with your utility providers as well as the more obvious credit providers such as credit card companies to ensure that unpaid bills are not going to endanger your future house purchase.
Don’t shy away from taking out credit
There is a misconception that if you do not have any loans or credit commitments then the lenders should be more willing to give you a mortgage than somebody with outstanding loans or credit cards but actually, this is simply not the case. Mortgage lenders like to see that somebody can demonstrate the ability to manage a debt and has a track record of making regular repayments so take out and use that credit card but make sure you make the repayments on time and if possible pay them off in full at the end of each month.
4) There’s A Problem With The Property
Sometimes you find that the house of your dreams is anything but and this is probably the one area in which you want to find out there is a problem, otherwise, you are going to get a nasty surprise when you come to sell the property. There are a number of ways that you can avoid buying a bad property.
Avoid ‘problem properties’
There are certain types of properties that you should avoid as they will be much more likely to cause you problems and they include the below list which , allow by no means exhaustive, should give you an idea of what to avoid
- Any leasehold property with a short lease of, say, less than 70 years remaining
- Non-standard construction properties such as concrete
- Properties directly above commercial properties, especially businesses that keep long hours such as takeaways
- Properties in flood plains
- Properties in a tower block over 5 stories with ex-local authority properties
- Any ex-local authority flat where half or more of the surrounding flats in the same block are still under council ownership
- Any property with Japanese knotweed
Unless the property is new build and covered by a guarantee, obtain a detailed survey
If you are going to spend a lot of money on a property then there is no point getting a basic valuation. You need to know if there are any problems with your future home and you need a homebuyers report. This will let you know about problems such as damp, dry rot or subsidence and believe me, you do want to know about these problems before you buy.
Get a good conveyancer to act for you
You also need to know the legals behind your property. Are there any ownership issues? If a leasehold property are there any restricted covenants in the lease which are unreasonable? Is your lovely view of rolling hills due to be turned into a 5 lane motorway this time next year? You need a good Conveyancer Solicitor to make sure that you should proceed with your sale..or not.
5) Your Seller Pulls Out
Unlike in Scotland, there is nothing in England or Wales to stop your seller pulling the plug on your purchase until the absolute last minute. However, although underhand practices such as Gazumping will continue to happen there are things that you can do to minimize the chance of your seller pulling out.
Find out what the seller wants and expects and don’t make silly promises
Each sale is different and you need to work out what is going on with your seller. Are they in the middle of a chain which is moving slowly or are they desperate to move as quickly as possible? Is there a deadline that they are working towards? What are their expectations? You need to communicate with the estate agents and find out what is happening with your sellers so that you know how to proceed. Don’t make promises regarding how fast you can proceed with the sale if those promises cannot be met; it is much better to under promise and then over deliver when it comes to such things as how long before the valuation will be done or expected exchange dates.
Beware of greed and fear
If a seller pulls out then more often than not it will be due to one of these two emotions; either greed, which can result in you being Gazumped when somebody comes along who is willing to put in more money than you or the seller pulls out due to fear. Usually this is the fear that you won’t ever be in a position to buy their house and you are just screwing them around. This second emotion is much more common and if handled correctly is much easier to manage and deal with in the following ways:
- Communicate at all times with the estate agent, mortgage broker and solicitor
- If there are delays then explain what they are, that they are fixable and give realistic timescales to be overcome
- When you agree the sale, if timescales are an issue choose a mortgage provider and solicitor who can ensure quick turnaround
- Get any information required by the lender back to them promptly and double check requirements so you send them exactly what they need
- Check if the mortgage lender instructs he valuation upfront or only when all documents are received and inform the estate agent accordingly
- If you run into any problems find out if it is fixable and how long it will take and then let your estate agent know that you are on the case
- If a quick turnaround is needed then follow up with the lender, mortgage broker and solicitor at least twice a week – you will get things done faster
Buying a property can be stressful and things can go wrong but if you follow these guidelines then you will definitely make it much more likely that your purchase will go through quickly and effectively