The Mortgage Clinic: 'Don't rush in to buying for fear of missing out'

'I've seen a bargain £180,000 property at an auction in mid-June. As a first-time buyer, I have an agreement in principle but am terrified that the credit crunch will scupper the deal, and the mortgage won't be approved in the required four weeks – losing me a 10 per cent deposit. Am I worrying for no reason? Or should I buy via the normal housing market?' Stuart Telling, Cumbria

Buying anything on the cheap induces a thrill, but bagging a bargain house is something else.

And as you've discovered, auctions now offer properties that – a year ago – would never have been on sale in such a venue. Why? The credit crunch has hurt many amateur buy-to-let investors who bought flats 'off plan' (before they were built) and now can't find tenants, forcing a reluctant sale.

"You can now pick up a new build flat (outside London) at auction for 34 per cent less than it was bought for two years ago," says Jeremy McGivern of Mercury Homesearch property search agent. While the price falls are in your favour, the reluctance of banks to lend cheaply and quickly could work against you.

Your "agreement in principle" should give you confidence that the lender is prepared to lend the required amount, says David Hollingworth at London & Country broker. "However, it isn't a formal mortgage application and your lender will want to carry out a valuation on the property itself. As long as it's done swiftly - and you can supply any supporting documentation quickly - then you could get the mortgage through in the time required." Typically, it takes two weeks to get a formal mortgage offer in place - so there's small room for error, and you're going to have to rely on your lender being efficient at administration. The valuation, then, is key – if you can afford the £400 fee, pay your lender to do it now.

"Auction properties are often in need of repair or have other issues not visible before a valuation highlights it," warns Andrew Montlake of broker Cobalt Capital. "There's no real way of telling unless it can be done before auction, which means being prepared to lose the valuation cost in the event that you don't get the house." Don't overlook the possibility that your desired property may also go under the hammer for more than your lender's valuation will support – leaving you with a nasty shortfall.

If you go for it, call your lender regularly to monitor the mortgage situation and ditto with your solicitor and the legal papers. Alternatively, you've little to lose by a change of heart, stresses Mr Hollingworth.

"Many first-time buyers are holding out, with many reports indicating that house prices are likely to fall, not rise. At best, they'll remain flat so don't rush into something for fear of missing out."

Send us your questions and you could receive £50 to spend at Amazon

Foxed by jargon? Worried by the credit crunch? E-mail a question to mortgageclinic@independent.co.uk. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden

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