- Getting ready to buy
- The purchase process
- Finalising your purchase
Getting ready to buy your first home? This guide has everything you need to know about home buying journey.
We're going to walk you through the entire home buying process, outline some things you should be thinking about, and give you some tips to make the process as smooth as possible.
Step 1 - Preparation
The very first thing you need to think about as a first time buyer, in most cases, is your deposit.
In order to buy a home, you're going to need a deposit that amounts to at least 5% of the price of that property, but the more you put into the purchase, the better interest rate you're likely to get.
In the majority of cases, you're going to be getting your deposit either partially or entirely from your own savings (unless you're fortunate enough to have a close relative gifting it to you)
This can be one of the most frustrating aspects of getting a mortgage as a first time buyer, trying to scrape together enough of a deposit to make it realistic to get on to the ladder; in this situation, it's important to get all the help you can and make the most out of your savings.
One of the best ways of making your money do the work for you is to open a Help to Buy ISA, this is a government-backed scheme introduced to help first time buyers take their first step on to the property ladder. In short, you put your savings into this account each month, and when it comes time to buy your first house, the government will contribute an extra 25% of those savings towards your deposit.
1.2 Additional Budget
Unfortunately, your deposit isn't going to be the only cash you need to stump up in order to get into your first home, there are a number of other aspects of the buying process that are going to cost you money, and it's crucial to factor those in right from the start.
Some additional costs might include:
• Stamp Duty Land Tax - Tax you have to pay when purchasing property or land over a certain price threshold, the rules on this are different for first time buyers, but you can find out more about that here
• Legal bill and disbursements - Once your mortgage is sorted, you'll need a solicitor to act on your behalf to finalise the deal, they'll charge you a fee for their service plus disbursements (unavoidable expenses they take on during their work)
• Furnishings - It's no good buying your first home and having no bed to sleep on, so make sure you've got some budget available to spend on furniture and necessary household goods.
But remember, it's important not to max out the credit cards when shopping for your new home, remember that changes to your credit score and monthly commitments will affect how much you can borrow on a mortgage.
1.3 Your Credit Profile
You probably already know that your credit profile is going to play a crucial role in securing a mortgage, but a lot of people buying their first home have no idea what their credit score is, what affects it, or how they can improve it.
If you've never checked your credit score before, it's a very good idea to do so before you start thinking about a mortgage.
Luckily there are now a number of free services that give you a credit score and report online, just check out one of the following:
Quick tips on your credit report:
• Electoral roll - Make sure you're shown as being on the Electoral Roll at your current address, this can be a quick win for improving your credit score.
• Nasty Surprises- Check for unexpected negative markings on your report, like missed payments and defaults, these can be quite common from mobile phone and utility providers and it's crucial that you appeal these and get them removed as soon as possible.
• Old Accounts - Close down old credit accounts that are no longer in use, particularly if they involve a former partner, this could lead to you being financially associated with that person in the view of a potential lender.
• Use Credit - It's important to minimise the amount of credit you have when applying for a mortgage, generally the less you have the better, but having no credit at all could be negatively impacting your credit score, so use a little on a credit card here and there and pay it off monthly.
If you are concerned about your credit file, or you find that you have a lower score than you expected, don't panic, lenders all take a unique view on credit profiles and there is still hope for getting a mortgage.
1.4 Your Mortgage Options
Now you're here, you've got savings in place, you've budgeted for all eventualities, you're credit profile is sparkling and you're ready to find out what mortgage you can afford.
This is the last step before you can start househunting for your dream home.
Naturally, you need to understand what's in your price range before you go viewing properties.
The way lenders decide what mortgage they are willing to lend you is by looking at your income and outgoings as well as how much of the property value you'll need to put on the mortgage.
A lot of lenders usually offer between 4 and 5 times the gross annual income of all applicants, so if you and your partner earn £35,000 a year together, you could possibly get a mortgage between £140k and £175k.
Remember though, the minimum deposit you need is 5%, so regardless of how much you can borrow based on your income, you are always limited by your deposit amount.
This is just general information and certainly isn't to be relied upon when looking for your first home.
The only way to get a completely accurate figure of what you can afford is to talk a mortgage adviser. We can talk you through your options and have a look at what your potential borrowing is with a free consultation.
Step 2 - Finding the one
Now everything's in place and you're ready to go out on the hunt for your first house.
But don't dive in without careful consideration, buying a house is a big deal and we need to think about a number of things when looking for the one.
Only you can know what you're looking for when thinking about property types and location etc. but it's important not to get carried away and overlook some of the more practical issues, like:
Are there sufficient local amenities?
Is there enough room for your family should you wish to expand?
What's the local transport like?
Is the property in good condition? (Have you flicked all the switches and checked all the windows)
Are there any previous issues with things like damp in the property? This could cause you some difficulty when you come to mortgage it later on.
We know it's exciting when you find what could be your first house, but it's better to be prudent now than sorry later!
Step 3 - Buy the house!
Well, it's not quite as simple as that, there are a few steps involved in buying the house itself, so let's break down the process.
3.1 The Price is Right
The first step in the process of buying your home is to agree on a purchase price with the seller, this is done by submitting a formal offer to the estate agent that is managing the sale, they will then pass this on to the vendor and come back to you with their decision.
When making your offer, it's important to strike a balance between getting the best deal and having your offer accepted before any other potential buyers beat you to it.
If you're sure this home is the one for you, and the asking price is within budget, don't spend too much time trying to haggle and risk losing the house altogether.
3.2 Finding a Solicitor
It's at this point you need to start thinking about who you're going to use as a solicitor, think about the kind of service you're after, do you want someone you can sit down with face to face? Or would you be happier using a completely online service?
Either way, get some quotes from different solicitors and make a decision on who you think suits your needs best.
If you don't know where to start, and you made a good choice when selecting your mortgage adviser (*cough*), just ask them who they would recommend.
You don't have to instruct your solicitor to start their work on your property until you get a mortgage offer, but if you're desperate to speed the process up, you can pay their fees and ask them to begin before that, bare in mind though that if you do this and your mortgage doesn't go ahead for some reason, you won't get that legal cost refunded.
3.3 Secure Your Mortgage
You've found the house, you've agreed a price, you're ready to go.
So, either you already got an AIP (agreement in principle) with your mortgage adviser before you put the offer in on the house, or you got a general price range from them and now you need to lock in an AIP.
Either way, give your mortgage adviser a call and let them know that your offer has been accepted, they'll ask you for some information and prepare to progress to the next stage of your mortgage, which will be either an AIP or a full application depending on which way round you did it.
Once your mortgage adviser has everything they need (supporting documents, property details etc) they can submit a full application to your mortgage lender, then there are a few steps the mortgage company will take like sending out a valuer to agree on the purchase price of your soon-to-be home, before issuing a full mortgage offer in writing.
Step 4 - The home straight
You've got a mortgage offer for the full amount you need, now what? Well if you haven't done so already it's time to instruct your solicitor.
4.1 The Legal Work
The bulk of the work your mortgage adviser does is complete after you've got your mortgage offer, now it's time to move forward to the legal side of the purchase, handing over the deposit and eventually signing your name on the deeds.
Your solicitor acts on your behalf as well as on behalf of the mortgage provider, they find out and inform you on everything there is to know about your chosen property, things you can't find out from a viewing.
They liaise with the seller to write up a contract and set a date for completing the house purchase.
4.2 - Pre-Contractual Searches
They carry out a number of searches to check everything is in good order with your new home, things like flood risks, whether or not there are future plans to build a motorway over your back garden, that kind of thing. All of these searches cost money, these are the disbursements we spoke about back in step 1, which you very wisely budgeted for because you read this guide.
Your solicitor then draws up a contract between you and the seller and the seller's solicitor creates one of their own to match, your solicitor will explain what is contained in the contract before you sign.
4.3 - The Exchange
Once both sides have their contracts ready, they can prepare to exchange them and get the final signatures, before this exchange takes place, the mortgage company requires you to arrange buildings insurance for the new property, it's also in your interest to do so since the property becomes your responsibility after exchange of contracts.
Once you've got the final contract from the seller's solicitor, you sign and enter into a legally binding contract to purchase that property.
It's at this point you have to part with your deposit, you will pay it to the solicitor and it will be held by them until the purchase completes and the full agreed price is paid to the seller.
4.4 - Completion
The contracts are signed, everything is in place, the solicitor has been paid the mortgage loan by your mortgage company and you're ready to complete your first ever property purchase.
Once the funds have been transferred to the seller, legal documents and the keys to your new home will be handed over to you.
Now, all that's left to do is move in and turn your new house into your home.