Credit scores and ratings
Before mortgage providers consider lending you money, they will look at several different criteria to determine whether you are a suitable candidate for lending. One of the most important tools they use is your credit report, which gives them an indication of how likely you are to repay the money they lend to you. It’s important that you manage your credit report and the details on it so that it doesn’t have a negative effect on any credit applications.
Almost every adult will have a credit history as they will have used credit at some point in their life. Even overdrafts, student loans or mobile phone contracts count as a credit agreement.
The report brings together lots of financial information about you and presents a picture of how reliable you are as a borrower. Along with basic information like your name, address (and previous addresses), who you bank with and if you are registered to vote, it details all your credit arrangements and the outstanding amounts, as well as any applications you’ve made (and whether they were successful). This will be bank and credit card agreements, mobile phone, insurance and utility agreements, and whether you have missed or been late with any repayments. It also contains public record information about court judgements and fraud.
What is a credit score?
Your credit score is calculated based on the information in your credit report. Confusingly, each credit referencing company uses a different scoring system and will calculate your score differently, but for all, the higher the number the better
Your credit score is an assessment of how good (or not!) you are at paying back the money you’ve borrowed. Every time you request credit – set up a phone contract, take out a loan, apply for a credit card, for example –  your credit score goes down. Make all of your payments on time and your credit score is likely to go back up.
What does a poor credit score mean for my mortgage?
Sometimes a poor credit score will mean an outright refusal from a lender. However, just because one lender will not give you money for a property, doesn’t mean that others won’t. The key to applying when you have a poor credit history is to know what lenders are looking for. This is where using a mortgage advisor is a real advantage as they know the whole market and what demographic or financial profile certain lenders are prepared to work with.
You’re more likely to be refused a mortgage if you have a poor credit history, are not registered to vote, have made many credit applications or have a high level of debt. These are all areas that can be resolved, so even if you are refused a mortgage the first time around, making changes and trying again in six months or so could mean a successful outcome.
Buying a property
Now the fun part can begin – you know how much you can afford to spend on a property, you’ve budgeted for the whole process and you have your support team in place – the search is on!
Step-by-step guide to buying a property in Scotland
- Have a mortgage decision in principle in place
Once you’ve talked to your mortgage adviser and gone through your budget and aims for a mortgage, you’ll leave with a mortgage in principle. This is a confirmation from the lender of how much they will lend to you. It’s a guide for you as to what you can afford and reassurance to a seller that you have the funds available to purchase their property. It is advisable to have proof of how much you can spend before you put in an offer on a property in Scotland. - Research your property
When you have found a property you like, you will need to find out as much as you can about it before you put in an offer. The sellers Home Report is the best place to start.
Anyone putting a property on the market must have commissioned a Home Report first. This sets out all the key information about the property. The only exceptions to the rule are new builds, converted properties and Right to Buy houses. The Home Report includes the following:
Survey – an assessment of the condition of the house, what repairs are needed and a valuation of the property.
Energy Performance Certificate – detailing how energy efficient the property is and what could be done to make it more efficient.
Property questionnaire – giving information such as what council tax band the property falls into, any history of flooding, available parking, what improvements have been carried out by the sellers and details such as the utility suppliers.
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Surveys
Most offers in Scotland are made unconditionally so it pays to find out as much as possible about a property first. If the Home Report has flagged any areas of concern, it may be worth considering commissioning a further detailed survey into these areas. However, there is a risk that you will commission a survey and then not win the bid on the house.
- Make an offer
If you see a property you like, your solicitor will register a notice of interest on your behalf. This means that you will be kept up-to-date on anything relating to the sale of the property, such as when a closing date is set. Properties in Scotland are usually marketed as ‘offers over’ or fixed price and the process is usually for interested parties to register their interest with the seller’s solicitor.
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It may be possible to make an offer on the property through your solicitor and agree on a price with the seller quickly. However, if there is a lot of interest in the property the seller is likely to set a closing date. All interested buyers are required to submit a sealed bid before the closing date. The seller will then review all the offers received and decide who they will sell to.
If your offer is accepted, the seller’s solicitor issues a qualified acceptance, which means that the property will be yours if contract details can be worked out. The solicitor will also hand over information about the property such as the title deeds and any planning papers.
Go through everything you receive with your solicitor as they may raise queries about the paperwork. Neither you nor the seller is committed yet.
- Agree the contract
Contracts and queries about the contracts will now go back and forth between solicitors. The two solicitors exchange letters, known as ‘missives’, where both parties negotiate on the terms of sale. Once all the terms have been agreed, this is the ‘conclusion of missives’, and the purchase becomes a binding contract. Both parties are now legally committed to the sale.
No money is paid at this stage unless it’s a new-build property, in which case a deposit may be required. Your solicitor will check the title deeds and talk you through any ‘title burdens’ – conditions attached to owning the property ranging from where you can park to more serious restrictions on how the property can be used and altered.
Solicitors and searches
Solicitors, or conveyancers, complete all the legal tasks relevant to the purchase of a property. They make offers for property on your behalf, draw up and assess contracts, provide legal advice, deal with the Land Registry, sort out payment of Lands and Buildings Transaction Tax and oversee the transfer of cash to buy a house. They also conduct searches on properties to make sure there are no planning or local issues that might affect the value of the property. They can do this before you make an offer, although some solicitors will charge for these regardless of whether you are successful in your bid or not.
- Completion of the mortgage and the sale
If everything has gone to plan, your mortgage advisor will contact the lender and finalise the mortgage. You will also transfer your deposit funds to your solicitor a few days in advance of the sale.
On the date of entry that has been agreed in the contract, your lender transfers the mortgage amount to your solicitor. The solicitor then pays the whole of the purchase price to the seller’s solicitor, and you’ll be given the keys to the property and the ‘disposition’ document transferring ownership to you. This is known as ‘completion’ of the purchase.
Applying for a mortgage
We’re here to take you through every step of applying for a mortgage, and will do all the paperwork and administration on your behalf. All you need to do is bring in your supporting documents!
Here’s a step-by-step guide to what that process looks like, what you need to prepare, and why (and what happens in a mortgage application):
First meeting – get a decision in principle
At you first meeting your advisor will ask you about your personal circumstances and expectations: what sort of property you’d like to buy and how much you can afford to spend on one. They’ll take you through a budget planner to look at what you earn and what you spend, what deposit you have and your credit history. Using all of this information, they’ll find the best deal based on your individual needs. You’ll leave with a decision in principle – this is basically an assessment of what a lender is prepared to give you – so that you and any sellers know exactly how much you can spend on a property.
You look for a property, we look for a mortgage
After your initial meeting, you and your advisor both start searching – you for your home, they for the deal that’s going to help you buy it. Your advisor will search the market for the most suitable mortgage for your needs and send you recommendations.
Second meeting – get a mortgage
Once you have found your property and had an offer accepted, it’s time to apply for your mortgage. You can contact your mortgage advisor at any point to ask for advice and help – all for free. You’ll need to bring several documents with you to your second meeting, and your advisor will provide you with a handy checklist to make sure you bring everything we need. At the meeting itself, your advisor will take you through the application process step-by-step. As they have researched the lender and prepared for the meeting beforehand, it should be a straightforward process, and barring any complications, you’ll leave with a mortgage in place.
Preparing your documents – what you need to bring with you
You’ll be given a list of documents to take with you to your second appointment when the advisor will take you through the mortgage application process itself. These will include:
– proof of your income from the last three months (payslips or business accounts, bank statements and income tax accounts)
– proof of identity, such as a passport or driving licence
– proof of address, such as a recent bill
– last three months bank statements
What happens next?
We’ll keep an eye on when your mortgage deal expires and be in touch with you prior to the expiry to arrange your next mortgage deal. If you’re on a fixed rate deal, your lender will usually return you to their standard variable rate at the end of the term, meaning you’ll pay more each month. By contacting you before this happens, we can ensure you move on to a more suitable package matching your needs and financial circumstances.
We can also offer advice on early repayments, payment breaks and any charges on your mortgage and what they mean.
When you are ready to move on from your first home, we will be on hand to help, give advice, and find you the best deal possible.
