Buying A House During The Covid19 Pandemic

A little reflection of my experience of being a first time buyer post-lockdown, during the Covid19 Pandemic. Also, a glossary of terms for new buyers!

They say buying a house is one of the most stressful things you will do. I naively thought this stress occurred nearer to the move in date. However, I am only on week four and can safely say the first two weeks were the most stressful of my life.

The Search

Firstly, thanks to the government withdrawing stamp duty, the properties for sale in my area came flooding in. This could potentially be a saving of £1-3+ thousand, depending on your purchase price.

My advice is to view a few different properties, even if you’re not sure about it, you begin to realise what you definitely do and don’t like. Also, photo’s can be deceiving, rooms can look bigger and smaller in person. But before you can view, many estate agents wanted to see a Decision In Principle. This is a certificate of how much you are approved to borrow based upon your wages. A free DIP can be obtained from London and Country*.

However, this surge in the market meant there were more buyers and if you like a property, you have to be quick. We went from casually browsing, to formally offering within three weeks. You need to be prepared to view and put an offer in immediately. There’s no time for second viewings any more and if it’s a popular property, be ready for ‘best and final’.

Best And Final

This was a new term for us and one that estate agents threw about as if we should know. This happens if there is more than one offer on a property.
Best and final : The highest price you are willing to pay. You will not get a chance to go higher, this amount is final.

The vendor (owner of the property), will then decide which offer to accept – usually the highest. However, there could be other factors, i.e. cash buyer, or in our case, if we agreed to go through the estate agent as our mortgage broker. We are still unsure as to why this was a condition, we were told that the vendor had previous negative experience with external agencies, so was keen for communication all to be from one place.

We had spoken to a few brokers, including a free online service from London and Country. All had commented on how it was the hardest time to get a mortgage that they had ever seen. We met with the estate agent’s broker but he was slow to respond to us and he recommended a deal we didn’t even qualify for. With a charge of £500, we were less than impressed and I can’t tell you the stress we felt at this point.

Brokers And Mortgages

Post lockdown of Covid19, mortgage lenders had reduced. They just didn’t want to take the financial gamble in a climate where many are losing their jobs. This meant that our 10% deposit wasn’t excepted by many of the lenders left. Those that were (First Direct, HSBC, Nationwide), were inundated with applications. First direct had a great rate, but for reference, FD/HSBC were taking over 60 days to process applications, which was more than double pre-lockdown. We were told that they were turning people away before they’d even applied and that they wanted an Experian credit score of 990+. For reference, my score is 988 and the only recommendation to improve was to have a mortgage payment history… So, despite good credit, a secure job , income and 10% deposit, mortgage providers were very limited.

This was worrying, so we went for plan C, Nationwide, on the advice of our broker. This meant increasing our monthly payment by £200 – not ideal, but there wasn’t a lot more that we could do, so our broker applied for a decision in principle, an agreement based on your financial suitability, without deeper credit checks/formal application. However, I discovered on Twitter that Nationwide wouldn’t be suitable for us and we would be instantly rejected. When I contacted the broker to query this, he took several days to reply that I was correct. So, he should never have recommended this to us. This was just more time wasted and there wasn’t any suitable lenders left. He also recommended that we organise a home buyers survey. Which, without a mortgage approval, we could potentially be wasting £500.

We just couldn’t keep waiting on replies and poor advice. So, despite the risk of losing the property as we didn’t use the estate agent’s broker, we took our business back to the free broker service from London and Country*.

You complete the form online and then they phone you to give you mortgage advice. Immediately, they were responding to our messages and questions, despite warnings on their website about delays due to a surge in demand. It’s worth noting that different brokers have slightly different ‘exclusive’ deals, but their advice must be impartial and personalised to your needs. Like all brokers, they receive a fee from the mortgage lender, but L&C don’t charge the buyer an additional fee on top of this.

*We both get a £5 Amazon voucher if you complete a mortgage search with L&C.

Reccomendation

The broker then completes a recommendation and you add in any additional details (e.g. previous addresses). Next an ID check will be completed, most do this digitally and you won’t need to send off your passport etc. Assuming you pass the ID checks, this is then submitted to the lender, which takes about 48hours and a credit check will be completed.

Solicitor

This is when you will need to appoint a conveyancing solicitor. This just means a solicitor who specialises in property. We actually were told by the first broker to book this in sooner (along with a survey), However, they all need paying. Without a mortgage offer, this was too much of a risk for us. Email a few different firms and ask for a quote for buying a property, many were able to email be instantly. Compare what the quotes cover and be prepared for extra costs down the line e.g. a fee to access government funding from a Help To Buy Isa.

Your estate agent will send a Memorandum of Sale. This is a formal document to confirm your offer. Ours took about two weeks to be emailed, at this point, the property on Right Move changed to STC.

Your mortgage company will want to complete a basic survey – to check the house isn’t overpriced etc. Some lenders charge approximately £300 for this, but most of the big names don’t. Then it is recommended that you complete your own higher level survey. We are opting for the mid tier ‘Home Buyers Survey’ approximately £500. The final tier is recommended for listed and older buildings.

Glossary

Decision in principle/Agreement in principle: A certificate to say how much you are eligible to borrow for a mortgage. This does not require a credit check. Many estate agents require this before you can view. Free to obtain on L&C.

Best and final : The highest price you are willing to pay. You will not get a chance to go higher, this amount is final.

Vendor: Owner of the property

Broker: The person who will give you mortgage advice and apply for the mortgage for you.

Conveyancing Solicitor: A solicitor who specialises in property, they will complete the legal side of buying a property.

 Memorandum of Sale: A document recording the prospective buyer offer, names and contact details of both the property seller and buyer, property’s full address and details of the solicitors acting for each party.

STC: Sold subject to conditions, basically an offer has been accepted.

Stay tuned for part two!

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