Mortgage Offer - from Your Conveyancer’s Point of View
Decision in Principle Issued
This means you appear to meet the lender’s criteria for your chosen product and they “should” be able to offer you a mortgage.
Lender Valuation by Appointed Valuer
Often a desktop or drive by to ensure the property offers good security and the price agreed is not over, or under, current market value. You can only borrow a certain percentage of the property value. The property is also compared to similar properties locally.
A lender valuation is NOT detailed enough for the buyer to rely on and a Homebuyers Survey should also be obtained. A lender valuation is for the lender's use and will not pick up on any structural issues. This step can take weeks to finalise.
Issue of Mortgage Offer
Following your lender’s review of your application form, payslips, P60s and all information provided to them the offer will be issued or refused. The offer is issued to borrower (and broker) and a special copy is issued to your conveyancer. This step can take weeks.
Conveyancers Copy
This differs from your copy and the conveyancer MUST wait for their copy. They cannot use the borrower/broker version. Conveyancers check the offer for any discrepancies and report back to the lender if any are found. This is called a lender referral.
Lender Referrals
The conveyancer reports the issue to your lender and waits for their response. The Underwriter takes a view as to whether there is a security issue and if the mortgage can proceed. A response can take weeks. The mortgage offer may need to be amended and reissued. To avoid a referral, make sure no errors are contained in the application forms. Ensure you advise your broker and conveyancer about issues such as cash gifts.
A lender referral is also needed when there is a title defect in the seller's deeds. Something which affects the lender 's security. Their monies are at risk so they are entitled to be notified.
Change of Circumstances
If your circumstances change after submitting the application forms you are required to tell the lender. For example, if you lose your job or your income or expenses change. You will breach the lender’s terms if you do not inform them. If they discover this they may withdraw the offer or take repossession proceedings.
Signing the Mortgage Deed
Having a mortgage offer in place does not mean the conveyancing process has concluded. Your conveyancer is most likely still dealing with enquiries with the seller's conveyancer. You also need to sign (in the presence of an independent witness) the mortgage deed and return the original to your conveyancer. Do NOT get a family member to witness the Deed. It will invalidate the mortgage deed.
Requesting Funds
After the offer is issued you are still NOT guaranteed the mortgage advance. Your conveyancer needs to apply for the funds, give the lender 3-5 working days' notice, and certify that there are no discrepancies and NO title defects.
Conveyancers then wait for lender confirmation of release of monies before proceeding. If your lender’s valuation or credit checks have expired the lender will not release funds.
If your lender releases the money too late on the completion date, and the banking system has closed for the day, then your conveyancer cannot complete and you are in breach of contract and may need to pay compensation to the seller.
To avoid this, conveyancers usually draw funds down the day before completion. You must pay daily interest from funds release.
As with most of the conveyancing process, what seems simple from the outside, hides a complex process underneath.
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