Five things you need to do before you buy a house

Mortgages and Home

Updated on 20 April 2009 | 4 Comments

If you're thinking of taking the plunge and getting on the property ladder there are a number of things you need to do before you start the buying process.

Save a deposit

Saving a decent deposit is the most important thing for buyers hoping to secure a best buy mortgage. This is because the credit crunch means that lenders are reserving their best deals for borrowers with a low loan-to-value (LTV).

For example, Alliance & Leicester has a two-year fix at 3.19% for borrowers at 60% LTV but the cheapest deal for borrowers needing to borrow 90% of their property's value is HSBC's two-year fix at 4.99%.

Potential first-time buyers should start saving in a cash ISA. Each adult in the UK can save up to £3,600 a year in a cash ISA and not pay tax on the interest. Barclays Golden ISA pays 3.61% and Natwest's Cash ISA Plus 3.51%.

Check your credit score

As well as preferring borrowers with a low LTV, mortgage lenders also restrict their best deals to people with a decent credit score. Making sure you pay bills and loan repayments on time will improve your credit rating, as will being on the electoral roll.

You can check your credit history with a credit reference agency such as Experian, Equifax or MyCallCredit. The Consumer Credit Act 1974 gives you a statutory right to see your credit reference files by simply writing to the agencies, with a £2 fee. Alternatively you can sign up for a free credit report from lovemoney.com partner, Experian.

If you find an error in your report, immediately write to the credit agency to ask for it to be corrected. If you don't get even minor mistakes changed, they could all count against you when a company uses your credit report to make a lending decision. If you've fully paid a CCJ or a bankruptcy has ended, make sure this is shown on your report.

Get an agreement in principle

An agreement in principle is an agreement from a mortgage lender that, hypothetically, they will lend you a certain sum of money for property purchase. It can be a useful tool to show any prospective seller that you mean business and can actually get a mortgage to cover the purchase price.

The agreement in principle will also show the key features of your mortgage and what your repayments will be. However when you actually apply for a mortgage on a specific property the lender will run additional checks including making sure the property is worth what you're paying for it.

Talk to a mortgage broker

A mortgage broker can help you compare the different mortgage products available and help you decide which one's best for you. They can also help you work out what your repayments will be on different home loans and the effect of any up-front fees. If time is of the essence, brokers also have inside knowledge of which lenders will process your application the quickest.

However, before you choose a mortgage broker bear in mind that some brokers offer products from a limited number of lenders while other brokers offer products from the whole of the market. There might also be some mortgage products that are only sold directly to consumers so it's also good idea to do some research of your own and see what's out there.

Shop around for a solicitor

Solicitors are often the weakest link in the home-buying process so it's important to find a good one. Ask around your friends for a recommendation and contact any solicitors they suggest for a quote. The solicitor will charge you for work including checking all the paperwork is correct so that the sale is legal, local searches, Land Registry fees and electronic payments. They'll also deal with stamp duty payments on your behalf. Some solicitors won't charge you if the deal doesn't complete but you'll still be liable for certain fees such as for the survey or valuation.

> Get free mortgage advice from a broker at lovemoney.com mortgages, our whole of market mortgage broker.

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