Buying a home for the first time, may seem difficult to know where to start. Here, we explain everything you need to know about getting on the first rung of the property ladder.
First step, work out how much you can afford to spend on buying a property. Use our Budget Calculator to get a realistic picture of your finances throughout the year and identify where you need to cut back. Look at all your current incomings and outgoings, as well as savings to ensure you have the correct finances to buy a property.
Our Budget Calculator takes you through everything you could spend throughout the year. You have the option of weekly, monthly, quarterly or annually, making it easier to understand your monthly mortgage budget. It may reduce your buying options, but you don't want to commit to a mortgage and then realise you can't afford the basics, as well as some of the finer things in life!
(ii). Getting the Money – Mortgages
The biggest cost for most people when buying a property is the mortgage. A mortgage is a loan secured against a property. Take a look at our list of recommended reputable mortgage lenders. A property cannot be sold without paying off the mortgage first and can be reposed by the lender if repayments are not maintained.
It is important to secure a mortgage with a lender before starting the property search. When you find the property you want, you will be in a stronger negotiating position and have the best chance of avoiding losing to another buyer.
Generally, the best mortgage deals are available to people who put in at least 15% of the property's value, leaving the mortgage company to lend the other 85%.
If your deposit is less than 10%, you may have to pay a"Higher Lending Fee" (also called a Mortgage Indemnity or Mortgage Guarantee Charge) which will add to the cost of your mortgage.
Take a look at ourMortgage Costs and Fees, which outline the extra costs you may have to pay.
We recommend you compare first time buyer mortgages with standard mortgages, as these can often give you a better deal, especially if you have a large deposit. You can even consider taking out a longer-term mortgage.
There are hundreds of different types of mortgages available, our mortgage advisors can help you decide which one is best for you.
How does a mortgage lender assess you?
Mortgage lenders will take your credit history into account as well as your earnings. They are mainly interested in have you defaulted on other payments, if yes, how many times, your existing credit agreements, if you have any County Court Judgments or if you have been declared bankrupt.
If your credit rating is poor, you may be able to get a Sub Prime Mortgage deal where you may pay a higher mortgage rate. Alternatively, you could wait until your credit record has improved. With mortgage lenders tightening their criteria, borrowers seen as ‘risky’ will find it more difficult to obtain finance.
You can check your credit reference file at low cost with the UK's main credit reference agencies such as Experian. If you see anything that's wrong you can challenge its validity.
If you are self-employed you may have to show the lender income from your business for at least two years and if you are a contract worker, you'll have to prove to the lender that your earnings will continue.
For couples, the lender will look at both incomes. Some lenders will consider groups of up to four people buying together. Think carefully before you buy with friends, relatives, work colleagues, because each of you will be "jointly liable" meaning you will have to pay the mortgage if one of the others doesn't pay their share.
If you can prove your income is about to increase substantially, i.e. via a job promotion, some lenders may be prepared to lend more.
While a lender will tell you what they think you can afford, remember you need to be comfortable too. Make sure you will be able to deal with unexpected extras that arise. Ask yourself:
• Can I afford to keep up mortgage repayments if my circumstances change, for example if I want to have a child or have to look after a sick relative?
• What would happen if I lost my job?
• What would happen if interest rates went up?
Budget for rises in interest rates - for example, for every 1% increase in the interest rate on a £100,000 mortgage the interest payment alone jumps by approximate £83 each month.
Choosing a mortgage
Once you have checked out all the mortgages on offer, you are ready to compare mortgages. Here are some tips:
• If you've got quotes from different lenders make sure you compare them on a like-for-like basis looking at payments, charges and flexibility.
• Most mortgages are 25 years in length, but you can choose a longer or shorter period if you wish, depending on what you can afford and how quickly you want to be debt free.
• At the end of any special offer periods, you may be switched onto the lender's standard variable rate. Towards the end of the period, ask your lender if they have any better terms available and don't be afraid to shop around to get the best deal.
Get a Mortgage in Principle
Once you've found a mortgage deal you like, you need to obtain a Mortgage in Principle agreement from a lender.
To do this the lender will need to do a full credit check on you. It’s best not to do too many checks, as each are recorded and it can damage your credit rating.
A Mortgage in Principle will show agents and sellers that you are a serious buyer with a mortgage lined up - putting you ahead of other buyers.
Your mortgage company will provide a summary of the mortgage agreement, called the Key Facts Illustration showing the total cost of the mortgage, the interest rate, whether there are any penalties for early repayment and any other special conditions.
(iii). Properties – finding the ideal property for you
Consider what is important in your ideal property, number of bedrooms, separate toilets and bathrooms, parking on-site, a shared or private garden, separate kitchen and dining room, a conservatory, how much repairs need to be done, how much time and money you would like to spend on redecorating.
Tell your estate agent exactly what type of property you are looking for, what you don’t want and what you would compromise on. Also inform them whether you have a mortgage agreed in principle.
Consider buying a new build; there are many benefits.These include:
• Not having to spend money or time redecorating or repairing your new home. You may even get to choose the design before it's built.
• New build house developers registered with the National House Building Council (NHBC) provide a 10-year warranty. Similar guarantees can be gained from other providers.
• You can avoid waiting for detailed surveys to be completed as your guarantee covers any unforeseen problems.
• The average new home is up to six times more energy efficient than traditional second-hand homes.*
• When buying a new build house there are no upward chains, so the process is quicker and less stressful. Some new home developers offer part exchange deals on your current home.
*Source: The New Homes Marketing Board http://www.nhmb.co.uk
If moving to a new area, do some research to see if it is suitable for you. Useful information about house prices, school performance, public transport links, local GP and hospitals and other amenities can be found on Propfine.co.uk.
The checklist below covers important things you need to know and where to get the information:
• Use the Government websites to find out what the council tax bandings are in the new area. The VOA website can be used for England and Wales while the SAA website is for Scotland.
• Get information on a variety of subjects including: population, crime, health and housing from the Office for National Statistics website.
• Check public transport links on Transport Direct or the TGL website for London.
• Visit the Highways Agency website to check your road transport links and any plans for future road developments that may affect house prices in the future.
• Look at the Environment Agency website to find out more about the local environment; including flooding and pollution.
(iv). Property Viewings
Use our website to find out as much as you can about a property you like using the photographs, floorplans, virtual tours, online brochures and local information available with most descriptions. Contact the advertising agent to check any missing information.
As soon as you have found properties of interest, book a viewing with the estate agent.
Take a copy of ourviewing checklistwith you to help you not miss anything important.
Take a tape measure and camera or use the camera on your mobile on every viewing you go on. The camera to remind you which properties have your favourite features. Always ask permission with the estate agent or property owner before taking any pictures. The tape measure is for you to see if your favourite pieces of furniture will fit in each room.
(v). Makingan Offer
Once you have found your ideal property, make an offer.Before you make it, consider a variety of factors when choosing your maximum price, to achieve the right deal for you.
First time buyers, buyers with no chain and buyers who have pre-arranged mortgages have a head start. If this is you, make the estate agent and seller aware of this, as this can put you in a very favourable negotiating position, especially if the seller is in a chain. Be sure to check if they are in a hurry to sell or have been trying to sell for a long time. If so, they may be willing to accept a lower offer to make the sale. Sellers not in a hurry to move are more likely to hold out for a higher price.
Gazumping & Gazundering
Gazumping is when the seller has accepted an offer but subsequently accepts a higher offer from another purchaser. This is legal and ensuring the property is taken off the market is one way of reducing this risk. Gazumping happens most frequently in a seller's market.
Gazundering is when a buyer legally reduces their offer just before the contracts are exchanged in the hope of forcing the seller to accept less for the property.
Once you have decided a maximum offer stick with it. If the seller refuses to budge, think very carefully if the property is worth the extra money and of course, what you will have to live without over the long term. Do your research and check what the property is truly worth. Whilst sold house prices can help give an idea of recent sales, it's better to see what the competition is like now. If there are few similar properties for sale in the area, the seller has the upper-hand. If there are any faults or repair work required, use this to justify a lower offer. In tougher times when fewer buyers, sellers may be more willing to negotiate on price.
Once you make an offer make it clear that it's subject to a contract and a satisfactory survey. If you are buying from a developer, while selling an existing property, see if they will offer a part exchange to buy your existing house.
(vi). Conveyancing – the legal aspects
Conveyancing is the process of transferring the legal ownership of property or land from one person to another.
A conveyancer performs many roles, these include:
• Finding out from the seller, who owns the boundaries, if anyneighbouring disputes and what fixtures and fittings are included.
• Check copies of any property guarantees, details of planning permissions and building regulation certificates.
• Check the seller is the real owner of the property and prepare a Report on Title for you. Arrange registration of title in your name.
• Check local authority searches and plans for the local area.
• Pay stamp duty tax on the property.
Our Tips for choosing and using a conveyancer
• Get some conveyancers' quotes via our website before you start looking for properties. Ask friends, family and your estate agent for recommendations.
• Tell your conveyancer if you want answers to any specific questions in advance.
• Let them know when you would like to exchange contracts and complete. Tell them you will require regular updates of how the purchase is progressing.
• Try to negotiate a no sale - no fee deal, so if the deal falls through you don't pay anything.
• Check and compare quotes carefully making sure they are like for like. Decide if you also want the conveyancer to arrange an Environmental Search, which will give information such as flood risk in the area.
You can also help to keep the process moving ahead by:
• Giving the conveyancer some information to get started; your mortgage lender details, the seller's details, proof of your ID and any specific questions you would like them to ask the seller.
• Completing mortgage application forms and responding to solicitors' queries as soon as you can. Use registered post or deliver documents by hand to save time.
• Checking seller's responses to questions carefully.
• Asking your conveyancer if you don't understand anything.
It can take between 6 and 12 weeks from the day your offer is accepted to getting all the paperwork completed and queries answered, even when no chain.
(vii). Exchange of Contracts
In England and Wales, Exchange of Contracts is the last stage of the legal process after which you cannot pull out (without losing your deposit and any legal costs you may have incurred).
Exchange of Contracts is when copies of signed contracts are exchanged between the buyer's conveyancer and the seller's conveyancer.
Once everything is ready, pay a deposit, usually 10% (but sometimes 5%) of the property value before contracts can be exchanged. If the buyer pulls out after this stage, they will lose their deposit and may face legal action from the seller. Have Buildings Insurance cover in place at this stage and buyers should also consider other protection such as Life Insurance.
A date for completion is usually set for at least two weeks after contracts are exchanged. This should give you enough time to arrange moving in.
Completion involves finalising of the sale when all the monies are passed over and the buyer has legal right to the property.
Your conveyancer will call you to tell you when your money has arrived - so you can get the keys and move in. The conveyancer will also send you a completion statement. Read it carefully - it should reflect their original quotation.
Buying in Scotland
In Scotland, the legal process is slightly different and buyers are committed at an earlier stage.Here, the seller usually sets a guide price and interested buyers put in bids and suggested completion dates. Once the seller accepts their preferred bid, there is a compensation penalty to be paid if one of the parties changes their minds. For this reason, you need to have arranged your mortgage before you put in a bid.
Unlike in England and Wales, many conveyancing solicitors in Scotland also have an estate agency part to their business.
(ix). Moving Day
Below our tips to make moving day as stress free as possible:
• Use a reputable removal firm - removal quotes on Propfine.co.uk. Look for members of the British Association of Removers who operate a strict code of conduct.
• Stagger moving days so you don't have to do everything all in one day.
• Give yourself time to do any essential work to the new property such as carpet cleaning or decorating that needs to be done before all your belongings arrive.
• Save time and cost by doing some of the packing yourself.
• Try to avoid Mondays and Fridays which are the busiest days on the roads.
• Check out the best value utility contracts for your new property in advance and read the meters in both properties on moving day.
• Redirect post beforehand - essential to protect yourself from identity theft
• If any appliances left behind, downloadthe instruction manuals from the manufacturer's website.
• Work through our Key Contacts checklist to ensure you notify everyone you know of your move.