In this article I am going to be taking you through the 7 Steps To Buying Your First Home. From finding something you can afford, right through until you get those keys, and everything in between.
Step-by-Step Guide to Buying your First House
- Stage 1 – Find a property you can afford
- Stage 2 – Choosing A Mortgage
- Stage 3 – Making An Offer
- Stage 4 – Arranging A Solicitor And Surveyor
- Stage 5 – Finalising
- Stage 6 – Exchanging Contracts
- Stage 7 -Completion
It’s been said that buying a house can be one of life’s most stressful events; will you find something in your price range? Will someone give you a mortgage? What about solicitors fees? What happens if it all falls through?
But, first thing’s first:
How Do I Go About Buying My First Home?
Before you start looking in estate agency windows you’re going to want to start saving money for a deposit. The days of 100% mortgages are long gone. The minimum you’re going to need is 5% of the purchase price; and that can take some saving! It’s a good idea to check your credit score, and of anyone else who’ll be on the mortgage. Possibly spend some time cleaning up your credit history before you start speaking to lenders.
This helpful link explains these preliminary steps in more detail: https://www.discover.com/home-loans/articles/10-steps-to-buying-a-home/
The key is to arm yourself with as much knowledge about the process as possible. As luck would have it, I can help you out, so here goes nothing. My 7 Steps To Buying Your First Home!!
STEP 1 – Find A Property You Can Afford
Flat or house? 2 bedrooms or 3? Are you going to want a garden? This one’s close to a good school, but the nearest shop is miles away. To be honest, as alluring as all those glossy pics in the estate agent windows are, before you start getting carried away with whether or not you could fit a golf simulator in the garage, you need to take work out what you can afford to spend.
Some of the big expenses to take into consideration are:
- Deposit – Generally speaking the more you have to put down as a deposit, the better; but at a minimum it’s going to be 5% of the property’s market value
- Solicitors Fees – Solicitors, I’m afraid, are a necessary evil (and not just as part of the home buying process), and they will expect to be paid for their time. Including VAT and searches, you’ll probably need to have a couple of grand set aside for their costs
- Mortgage Fees – These might include a booking fee, an arrangement fee, and a mortgage valuation fee – again, roughly £2000. These fees can be added to your mortgage. However I would advise paying these upfront to avoid paying interest on them for the life of your mortgage
- Stamp Duty – Stamp duty is a government tax that is paid on homes costing £125,001 or more. Don’t look shocked – you had to know they would be making something out of this). However, first-time-buyers pay no stamp duty on the first £300,000 for properties worth up to £500,000. Happy days.
Of course this list only covers the upfront costs. Before you start looking for a house there will be other things to think about such as:
- What can I afford to spend on monthly mortgage payments?
- How will I cope if my financial situation changes?
- Will I be ok if interest rates change?
- Do I need to pay for removals?
- What is the council tax band of the area I want to move to?
I would also advise checking your credit report to get an idea of your score. Lenders will look at this when they consider your application for a mortgage. It’s a good idea to check there aren’t going to be any nasty surprises. Even if it means holding off for a bit to improve your rating before moving forward.
STEP 2 – Choosing A Mortgage
Arranging a mortgage can be quite a time-consuming process. It’s never too early to start thinking about it even if you haven’t found your dream home yet.
You can get a mortgage from your bank, a mortgage broker, or an independent financial advisor. As I said earlier, your credit history will be checked. A potential lender will want to know how much money you are looking to put down on a deposit.
Our articles What Is A Mortgage and How Much Deposit Do I Need For A Mortgage break this entire process down nicely. They walk you through help-to-buy schemes and 0% mortgages with a guarantor. Although I must stress that not every lender will offer these options.
Once you have found a mortgage you are happy with it will be agreed ‘in principle’. This tells you how much the lender is likely to offer and the interest rate you will pay.
Now, before we get to the really exciting step in 7 Steps To Buying Your First Home:
Is It Bad To Buy The First House You Look At?
The first house you look at may well be ‘The One’. However, before you decide you are in love and are going to make a commitment forsaking all others. I would always recommend having more than one walkthrough.
I would also suggest taking a look at some others in between. It’s not cheating on the house you love exactly. It’s just a good idea to make sure there’s nothing better out there first that would suit you and your needs better. You can always come back to the first house you saw if you still feel the same way after looking at some others. (Note: this only really works with house hunting. I wouldn’t recommend applying this rule to certain other areas of your life!)
Anyway, on to the bit you’ve been waiting for:
STEP 3 – Making An Offer
Ok, so you’ve found a house you love and can afford, and you’ve compromised on the golf simulator idea by agreeing to get a hot tub as well, so what’s next?
Your next stop is making an offer, usually through an estate agent. As the buyer you will have no estate agents fees to pay, these are only paid by a seller.
STEP 4 – Arranging A Solicitor And Surveyor
As you know, a solicitor will handle all the legal stuff. This includes submitting searches to the council to check for any planning issues, or other things locally that might affect the property’s value. Basically, anything contract or paperwork related is down to them.
A surveyor, as the name suggests, will survey the property to check for any problems that might affect your home and the cost. It is in your interest to pay for a decent survey to help you avoid hidden costly problems. It can also help with price negotiation, for example; if a survey reveals that there is an issue with the house that would cost you to repair, you could ask the seller to lower the price by that amount.
There are several different types of survey:
- RICS condition report – The cheapest and most basic, and costing around £250. This survey is most suitable for new-build homes or those in very good condition. No advice or valuation is provided with this type of survey
- RICS homebuyer report – A much more detailed survey, and suitable for conventional properties in good condition. This survey does include a valuation and will set you back £400+
- Building or structural survey – The most comprehensive survey and suitable for all properties. Ideal if you are purchasing an older home, but it’s going to cost you: £600+
STEP 5 – Finalising
Once all your surveys are complete you might want to go back and negotiate on the asking price. There are a couple of reasons for this:
- Maybe your survey has uncovered a problem with the property that will be expensive to repair, and you can use that information to get a reduction in price
- Your lender might value the property at a lower price, which means you won’t be able to match your original offer due to the shortfall
It is this finalising stage that is often considered the most stressful. It is during this time that delays and problems are most likely to arise. Situations like:
- Your mortgage application being rejected
- The seller changing their mind and taking their property off the market
- The seller accepting a higher offer from another buyer
Unfortunately, if these things happen all you can really do is take a deep breath and start again. You can alleviate a lot of the worry and stress beforehand by keeping the lines of communication open. Making the effort to stay in touch with the seller via your solicitor and estate agent can mean the difference between rescuing a tricky situation, and not.
Hopefully though everything has gone according to plan, and your lender is proceeding with your mortgage. Once you have received a binding mortgage offer you will be given 7 days to think about whether this is definitely the right mortgage for you. During this time it’s a good idea to compare the offer with other mortgages, before letting your lender know that you want to go ahead.
Can I Still Change My Mind At This Point?
Maybe, even after getting this far, you are starting to have second thoughts? Now the kids have decided they want the garage converted into a playroom and that golf simulator dream is slipping away…maybe you should look for something with a double garage..
If you decide not to buy after all you can pull out of the sale and cancel your mortgage application before you have exchanged contracts. You should be aware that, depending on how far you’ve gone in the process, you might lose some of the money you have already spent out.
STEP 6 – Exchanging Contracts
But you are going ahead, and so long as there are no problems or delays on the seller’s end you should soon receive the contract to sign and complete the sale.
Before you sign, go through the contract with your solicitor to check that all the details are correct, that you are happy with what the sellers are leaving at the property (if anything), and that you have no other questions.
Once you have signed, you and the seller are committed. Now would be the time to make sure you have buildings insurance in place to cover the structure of the property.
STEP 7 – Completion
The final step of our 7 Steps To Buying Your First Home is in sight. This final step can be broken down into several stages:
- The rest of the money that is owed on the property will now be transferred from your solicitor’s account to the seller’s solicitor’s account.
- You’ll need to pay your solicitor’s bill
- Your solicitor will register the sale with the Land Registry – the property is now in your name
- Collect the keys to your new home from the estate agent!
- Argue with the rest of the family over what exactly is happening with the garage
Well I count that as 7 steps, so that brings us to the end of our 7 Steps To Buying Your First Home. We hope that you find this helpful and remember we are just a phone call away if you have any questions.
- The Help To Buy Scheme: A Homebuyers GuideWhat Is the ‘Help To Buy’ Scheme? ‘Help To Buy’ (HTB) is a government-backed scheme that was created to give first-time buyers a more affordable way to get onto the property ladder. It allows you to put down a 5% deposit, with an additional 20% loan provided by the government. This means that you’ll only […]
- Is Moving Debts To Your Mortgage The Easy Saving It Seems?Whatever the reason may be that you need finance, if you have a mortgage particularly one that is low rate, it seems like a no-brainer to simply add on the debt of that new car or kitchen…but should moving debts to your mortgage really be your first port of call? Of course, saving and budgeting […]
- Can I move my current mortgage to a new house?If you want to move house, what happens to your existing mortgage, can you just move mortgage? Can you use it to buy your new home, or do you need to get a new mortgage? In this article I’m going to be looking at whether or not the decision you make will increase your debt. […]