Preparing to buy a house checklist

The journey towards home ownership is exciting, but can often be a lengthy process.

From reviewing your financial situation and researching the property market to submitting your mortgage application and finally getting the keys, finding and buying a dream home demands patience and careful consideration. 

However, the success of buying a home begins long before you set foot in your new property. Before you start the property hunt, it’s important you familiarise yourself with all the essential steps of the home buying process and make sure you’re well prepared from a personal finances point of view. 

In the checklist below, we’ll dive into some of the essential criteria to consider when planning to buy a home, helping you navigate through the process with confidence.

Jump to:

1. Access your financial situation
2. Start saving up
3. Get a credit report for mortgage preparation 
4. Get a mortgage agreement in principle (AIP)
5. what stops you from getting a mortgage 

1.  Access your financial situation

While becoming a homeowner is a thrilling step forward, it is also a significant financial commitment. So, whether you’re looking to buy a small apartment or a family house, it’s important to start the process by carefully assessing your financial situation and identifying your limits. A good place to start can be taking a look at our mortgage guide and mortgage calculator.

One of the best ways to review your finances is to create a document with all your income and expenses on a monthly and annual basis. By doing so, you’ll be able to get a good view on your financial stability, identify potential gaps and determine how much you can allocate toward housing expenses. 

As part of your personal finance assessment, remember to consider all the additional expenses that come with the home buying process, including mortgage fees, broker fees, stamp duty and legal costs, along with moving costs and buying new furniture or home items. Many new-build properties also require a reservation fee, which also needs taking into account if you’re looking at buying this type of home. By accounting for these expenses up front, you'll have a more accurate picture of the entire process, avoiding unwelcome surprises along the way.

2. Start saving up

Once you’ve reviewed your financial situation and set your future goals, it’s time to start saving up for your deposit and other associated costs. 

To make sure you’re saving money systematically and effectively, there are a few tips to follow:

• Create a dedicated savings account
• Cut unnecessary expenses
• Look for extra income to boost your budget
• Explore government programmes, such as Shared Ownership by Places for People, to help you with the home purchase, if you’re eligible for the scheme.

While the saving up phase of the home buying process may feel a bit daunting, it’s important to realise that the earlier you reach your financial targets, the earlier you’ll be able to become a homebuyer.

In addition, adjusting your spending habits and learning to handle money carefully comes in handy when becoming a homeowner, making sure you’re well-equipped before making one of the most significant financial decisions in your life.

3.  Get a credit report for mortgage preparation

Your credit report is a useful indicator of your financial stability, potentially enabling you to secure a mortgage with more favourable options. 

These are some of the main things you should know about your credit report:

• The score given by a credit agency isn’t the most important factor, it’s your credit history and report that lenders see
• Lenders use your credit report to assess your ability to repay your debts
• A credit report showing no late or missed payments, no CCJs or debt arrears and good credit utilisation in the past indicates a lower credit risk, making you a more attractive borrower.

There are several credit reference agencies (CRAs) in the UK, with the main ones being Equifax, Experian, and TransUnion.

When first checking your credit report, you don’t have to worry about additional costs, as the majority of the providers offer these reports free of charge. 

Building a strong credit history is a gradual process, and it’s better to start improving it as soon as possible to be well prepared for the mortgage application process. Some of the tips to boost your credit report include:

• Check your credit report regularly so you can spot and deal with any issues if they appear e.g. errors
• Make sure you’re registered on the electoral roll at your current address
• Pay your bills and any balances or payments due on your credit cards or loans on time
• Keep your credit card balances low, relative to your credit limit, to show that you can manage credit well
• Avoid applying for or opening new credit accounts in the six months before you plan to apply for a mortgage, as this can make you look like a higher risk to potential lenders
• Set up different types of credit that you can afford to pay off and only use this for normal spending (i.e. things you would buy anyway), such as credit cards, mobile phone contract and utility bills. Over time, meeting these financial commitments will help to strengthen your credit history.

4. Get a mortgage Agreement in Principle (AIP)

A mortgage AIP is a procedure carried out by the mortgage lender, determining how much money you can borrow to buy a home based on their affordability checks, your credit history, income, debts, and other financial commitments.

Getting a mortgage AIP is an optional step in the home buying process. However, buyers with an AIP are generally considered more serious and financially capable, which can be a huge benefit when it comes to a fast-moving housing market.

With knowing your options and price range before you even start looking at potential homes, you can also make quicker decisions and submit offers with confidence, reducing the time spent on house hunting and having a better idea of where you stand with your home budget.

5.      What stops you from getting a mortgage? 

While a mortgage AIP provides valuable insight into your financial readiness for buying a home and may even help you address potential issues before you submit a full application, it's important to note that it doesn't guarantee approval of your final mortgage application.

There are several things that may be stopping you from getting a mortgage:

Credit issues and financial history 

A poor credit history is one of the most common reasons for your application to get rejected, and lenders all have their own requirements for mortgage approval so can look for slightly different things to assess your lending risk. Therefore, make sure you monitor your credit report in advance and take all the proactive measures possible to improve it before you apply for a mortgage.

Debts, bankruptcy or CCJs in the past can negatively impact your mortgage eligibility. Consulting with a regulated independent financial advisor before you start looking for a property to buy can help you improve your financial profile and increase your chances of securing a mortgage in the future. 

Incomplete documentation 

Missing or incomplete paperwork supporting your mortgage application can result in delays and rejections. However, it’s one of the minor issues which can usually be easily fixed. 

To make sure your application is as quick and smooth as possible, it can really help to use a mortgage broker or advisor, as their experience can make a big difference. They can guide you through the documentation requirements and help you navigate any potential challenges.

Inadequate savings

If you don't have enough funds saved, you might struggle to meet the minimum deposit requirements, which will mean that you either can’t apply for the mortgage at all yet, or may only be offered higher interest rates as your loan-to-value (LTV) is higher than intended. Lender requirements vary, but usually the deposit needed is a minimum of 5% of the property’s sale value, or 95% LTV. 

If you’re looking for options with lower deposit requirements, it could be worth considering Shared Ownership, if you are eligible for the scheme.

Failing to pass affordability checks 

When you disclose your financial history and bank statements, lenders consider all of your financial commitments, including debt, comparing your monthly debt payments and other essential outgoings to your income. Every lender has slightly different criteria for their affordability checks, but they need to know that you can afford mortgage repayments in order to lend responsibly. A mortgage broker or advisor can help you by talking about affordability ahead of a mortgage application to ensure you’re in the best possible shape.

Unstable employment and spending habits

Frequent job changes or gaps in employment can raise concerns for lenders about your ability to repay the mortgage. Similarly, lenders will look at your spending habits and raise an issue if they spot significant concerns or irregular financial behaviour.

If you are self-employed, you will usually need to provide at least two years of accounts for your business, or tax records, to prove your income to the lender.

Choosing an incompatible lender

And finally, the choice of lender might play a key role in your application outcomes. While some lenders might be more open to borrowers with various backgrounds and financial histories, others might have more strict eligibility criteria. A mortgage broker or advisor will know from their previous experience about which lenders might be the most suitable for your specific situation and application.

Conclusion

To conclude, there are a whole range of obstacles you might meet when preparing for a house purchase. However, with careful planning, proactive steps, and the guidance of professionals, you can usually overcome these challenges and successfully start your home ownership journey.

If you’re feeling ready to take the next step, you can find a new home with Places for People.

If you enjoyed this blog, visit our new homes resources and advice section to read more similar content.

Please note: This guide should not be considered professional financial investment advice. We strongly recommend that anyone considering taking out a mortgage should seek independent advice from a registered financial professional. Please be aware that your home may be repossessed if you do not keep up repayments on your mortgage.