Step-by-step: The New Build Mortgage Process
It can be daunting applying for a mortgage if you’re a first-time buyer, but the good news is that it doesn’t have to be complicated. The new build mortgage process is more or less the same as if you were buying an older property – with a few exceptions. We’ll take you through it step by step.
Before you even start looking at mortgages, you need to take a deep dive into your personal finances, and those of your partner if you’re buying together. Write down your monthly income and expenses – like rent, bills, car loans and subscriptions. Yes – you need to take your Netflix subscription into account! You’ll also need to find out how much cash you have available for a deposit – if it’s in savings accounts, these may have withdrawal limits or penalties. At this stage, it’s also helpful to gather together 3 months of bank statements and payslips, and make sure you have valid ID to hand – that way you won’t be running around trying to find your passport at the last minute. If you want to be super prepared, find out your credit score using an online service such as Experian, MoneySuperMarket or Compare the Market. By looking through your credit report before you apply for a mortgage, you might be able to increase your score.
Once you’ve got a clear idea of your financial situation, you can move on to looking at mortgages. You can find out how much you can borrow by contacting a bank or building society to enquire about one of their mortgage products, or by speaking to a mortgage advisor, who can look at a variety of mortgages. How much you can borrow will be affected by a few factors including your income, amount of deposit and credit score.
Your bank, building society or mortgage advisor will help you get a ‘decision in principle’ – this is a document which gives an indication as to how much you may be able to borrow. Also known as a ‘mortgage in principle’ or ‘agreement in principle’, this document can be helpful in proving to the developer that you’re in a position to buy. However, the amount you can borrow could change after a full examination of your financial history, so make sure you take this into consideration.
Now that you’ve done a full financial health check and you have a budget in mind, you can start your property search. When looking at new build properties, they may be at different stages of the build process, so ask about the estimated completion date. Once you’ve found a property that you love, you can reserve your plot! You’ll normally pay a small reservation fee to take it off the market while you get the legal process started.
Now that you’ve reserved a property, you’ll need to complete the next stage in the new build mortgage process, which is to put in a full application. If you’ve been prepared and gathered all of the documents you need ahead of time, this part shouldn’t take too long. Your bank, building society or mortgage advisor will advise you on the documentation you need to provide, and once everything’s submitted, the lender will provide you with an official mortgage offer. You can then pass this on to your solicitor, who will request the mortgage funds from the lender later in the process.
Although you’ve reserved a plot and secured a mortgage offer, the property still isn’t secured until you exchange contracts. In the case of a new build, your solicitor will be dealing with the developer, rather than an individual seller. You’ll normally exchange contracts within 4 weeks of reserving your plot, which could be a few months away from the property’s completion date. As some mortgage offers are only valid for a few months, it’s worth checking with your lender if you’ll need to apply for an extension. Once you exchange contracts, you’re legally committed to purchasing the property, and can’t withdraw without facing a penalty.
Once your property has been built, you’ll set a date for completion. This is when your solicitor will request the mortgage funds from your lender, and, together with any deposit, send it to the developer to complete the sale. Once the sale completes, the property is then legally yours.
Once you’ve completed the sale, the developer will arrange to hand over the keys to your new property and give you any information you might need about the plot. The weeks of paperwork and phone calls will all be worth it when you’re sitting in your brand-new home!
To find out more about buying a new build home with Lendlease, read our guide.