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UK Mortgages & Loans -> How to Buy a House

On average, the majority of people who own their own property will generally move to a new home around every seven years. This means that every seven years, potential house buyers are driving around various towns, looking at the schools, going into complete strangers' homes, having meetings with their banks, as well as spending huge sums of money. The process of moving home is a very long one and is sometimes quite a difficult one, though it could also attract a lot of excitement and happiness if the house buyer finds their dream home and they are able to afford it.

The most important step for someone when they are looking at buying a house would be to work out how much they can afford to pay out on a new home. If they have not set up a budget which lets them see how much they are spending on normal daily things, now would be the time to do it.

A good budget would help to guide the borrower towards the right price range of property as well as stopping them from spending more money than they should on their house. This may happen when the borrowers’ bank says that they can afford certain priced homes based on their income and debts, though they have not taken into consideration the borrowers expensive hobbies, their monthly child care expenses, and the possibility that they may need work doing on their car. Most people will not want to have to change their lifestyle just so that they can buy a more expensive home.

If the borrower has an idea of their personal budget, they would be able to compare their own figures with that of the bank which will enable them to pick a very manageable mortgage repayment which will also allow them to continue with the same lifestyle that they currently have.

The next step in the house buying process will be to get pre-qualified or pre-approved for a mortgage. Getting pre-qualified simply means that the borrower has advised the lender of their income level and their debt and credit information. The mortgage lender then estimates what the borrower can afford. Pre-approval, however, simply puts the borrower a lot closer to the actual loan, meaning that the lender would have done all of the work by researching the borrowers credit report, looking at their debt to income ratio, as well as having performed a more in depth analysis of the borrowers financial situation. In a lot of cases, it would be a lot more beneficial to the borrower if they were to be pre-approved because they will then not have any surprises occurring when the lender checks their credit report, especially if they have not checked the report themselves first.

In the house buying procedure, the advantage of being pre-qualified or being pre-approved is double. Not only will the borrower have the extra knowledge of knowing what they can afford, the property seller could also accept their offer over someone else’s if they have been pre-approved and the other buyers have not been.

The judgment here is that someone that has a pre-approved mortgage offer is more than likely to end up with a completed sale, whilst an offer from a buyer who has not been pre-approved may not be such a certain thing. The seller generally does not want to take the risk of losing the sale of their house.

As well as the mortgage itself, the borrower will also need to add property tax & insurance to their monthly payment. And, if they do not make at least a 20% deposit, they will also have to add extra Private Mortgage Insurance. As well as this, a borrower will also have the expenses of closing costs. This may use up some of the money that the borrower has as a deposit.

All of these extra costs add up, so the borrower must ensure that they are comfortable with the full amount of their monthly payment and they should be aware of how much they can easily use as a deposit prior to starting their property search and falling in love with a home which they cannot realistically afford.