The process of buying a house at auction tends to be quite different from purchasing a home through traditional methods, primarily because the time frame you have to order your affairs is far shorter. When buying a house at auction, it is imperative that you have everything in place to close the sale quickly and move into your new property.
In this article, we will answer the question; can you buy a house at auction with a mortgage? Discuss the benefits of using an independent mortgage advisor, and cover the process of buying a house at auction with a mortgage.
Can you buy a house at auction with a mortgage?
Yes. You must first meet a particular criteria in order to qualify for a mortgage on a house you don’t own, but it is completely possible. There are several aspects of your new property that must be considered when applying for a mortgage before buying, including whether the heating and water is running and functioning properly, else you may not be able to obtain a mortgage in principle.
A mortgage in principle is the term for a mortgage on a house you don’t yet own that will provide a comprehensive overview of your current household funds to determine how much you could realistically afford to pay for a property, and the amount your lender would give you. It is vital to have a mortgage in principle in place when buying a house at auction so you can set restrictions on your bid on the day of auction.
Additionally, a mortgage in principle will act as evidence of your feasible affordability.
- How do I apply for a mortgage in principle?
When applying for a mortgage in principle, you could choose to work with a mortgage broker (otherwise known as a mortgage advisor) or consult the lender directly. We recommend you consult an independent mortgage advisor to receive the fastest service and the best prices possible, as oftentimes, going direct can take longer.
To create an accurate and comprehensive mortgage in principle, you will need to provide personal information, your previous addresses from the last three years, the details of your income and any contractually binding, or otherwise, monthly outgoings. Your independent mortgage advisor will also evaluate your credit history to determine whether you’re a suitable applicant using hard or soft checks.
- What are hard and soft checks?
Hard and soft checks are two methods of evaluating your creditworthiness. A soft check is a simple identification check which ensures that you are who you say you are and a basic check of credit history that includes credit cards, loans (excluding student loans), mortgages, phone contracts, previously rented properties and car finance. However a hard check is a more in-depth analysis of your credit history and too many can impact on the way a lender looks at you as a risk.
Should you apply to several mortgage brokers (or lenders), who each conduct hard checks, regardless of their outcome, your repeat hard checks will remain on your report for up to two years and could result in a lessened credit score. It will be more difficult to obtain a mortgage in principle if you have a low credit score. So it is important to ensure your application is as perfect as possible before applying. We would always recommend finding a good independent mortgage broker who can look at all lenders for you and minimise the chance of rejection, also minimising the number of credit checks undertaken.
Why choose an independent mortgage advisor?
Independent mortgage advisors search the mortgage market on your behalf to help you achieve the best rate possible. Additionally, they will help you formulate the perfect application for a mortgage in principal so the wait for approval is far shorter and has more chance of being accepted.
Here at Stuart Brown Mortgage Services, we pride ourselves on our thorough analysis and expertise that helps our clients achieve their dream homes for the lowest possible price, in the shortest length of time. We compare criteria and rates from the whole market and are constantly updating our knowledge to give you the best chance of your mortgage being approved first-time.
The process of buying a house at auction with a mortgage
Before buying a house at auction, be aware of the expiration date of your mortgage in principle. This document is only valid for between 30 and 90 days after the initial issue, and will need to be reapplied for if you exceed that date. Furthermore, be aware that even if you have a mortgage in principle for a property, you may find it difficult to obtain a mortgage if you intend to buy a house with a non-standard structure, a presence of Japanese Knotweed, or serious defects.
Buying a house at auction requires you to pay the full 10% deposit very soon after the auction ends (unless agreed otherwise), if you have attended an unconditional auction. Failure to comply could result in losing your deposit and the expectation to pay the costs for the resale of the property at a future auction. Additionally you will be expected to complete the purchase very quickly, not doing so will incur costs and/or loss of the deposit too.
It is imperative that you start the process to convert your mortgage in principle to a full mortgage, have it finalised and offered, conduct a property survey, engage with solicitors, acquire insurance, and complete any further paperwork. The most important thing to assess before buying at auction is whether a mortgage can be obtained on the property given its condition and mortgage-ability, even having an agreement in principle wont guarantee this.
So, can you buy a house at auction with a mortgage? Yes, if you finalise a mortgage in principle and fully understand the terms of the auction. However, we understand that buying a house at auction can be overwhelming. So please don’t hesitate to contact us here at Stuart Brown Mortgage Services.
We will happily guide you through the process in more detail to ensure you get everything right the first time. We’re here to help you achieve your dream home, whether you’re buying traditionally, or buying a house at auction.
HOW CAN STUART BROWN HELP?
Here at Stuart Brown Mortgage Services, we offer expert mortgage broker advice to help those applying for their first mortgage, repaying a current mortgage, or finding a new deal so the process goes as smoothly as possible. We can also help with buy to let mortgages and give advice on insurance & protection.
We can help you to accurately calculate your monthly mortgage costs, navigate legal costs and help you understand how home valuations work when you’re trying to remortgage. With a combined 64 years of experience, there’s nothing we haven’t seen before and can’t help you with.
Please don’t hesitate to contact us if you have any enquiries about our services, or just need some advice!
Telephone 01525 877650 or 01442 252040
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.