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First Time Buyers
Even
experienced home owners find buying a property a complicated
and confusing exercise, particularly as it's something most of
us only do a few times in our life. For first-time buyers, the
process can be even more baffling.
We have used our extensive experience |
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of the housing market to boil the process down into its constituent
parts. Our simple guide takes you all the way from finding the
right property to the day you move in.
Choosing
a Property
The first thing you need to decide when you buy your first property is
what sort of area you want to live in. Make a list of the things that matter
most to you. These might include having a good school nearby, convenient
local transport links and convenient shops or restaurants.
Next, you will need to decide how many bedrooms you want, whether you need
a garden and whether you would prefer a house or a flat.
Bear in mind that bigger properties not only cost more to buy, but normally
also cost more to heat and maintain as well. With this in mind, you may
prefer to choose a newly-built house, which should require less upkeep
in the first few years. A bigger property also means a bigger Council Tax
bill.
You may never find one property that is absolutely ideal in every respect.
Be prepared to trade off one factor against another as you look around.
Would you be prepared to live in a cheaper area if that meant being able
to afford a garden, for example?
CHECKLIST
AREA
- Distance to work and quality of local transport if relevant
- Quality of schooling if relevant
- Quality of local shops and restaurants
- Other important amenities (e.g. local parks or heathland) or transport links (e.g. to visit friends or relatives)
TYPE OF PROPERTY
- Price you can afford (you can use our calculators to find out how much
you are likely to be able to borrow, and how much a mortgage will cost you per
month)
- Heating and other maintenance and on-going costs including council tax
- Flat or House / Bungalow
- If a house, detached, terraced or semi
- New(ish) or older
- Number of bedrooms
- Size of garden if appropriate
- Garage (or not)
Finding a Property
Once you have decided what sort of property you are looking for and the
area where you want to live, contact as many local estate agents as possible.
Ask them to send you details of suitable properties on their books on a
regular basis. You can also look at the various estate agency and other
Internet sites that list property – although you need to be aware
that some estate agents don’t yet list their properties on the Internet.
It is generally worth chasing estate agents once a week or so to ensure
you get an early look at new properties, which have only just been placed
with the agent. In this way, they will know you are a serious buyer and
they will generally make the effort to contact you when new properties
come up.
Once you get started, you will probably see a lot of different properties
in a fairly short period of time. Keep a record of each one you have visited,
together with a few notes reminding you of its good and bad points.
Choosing a Mortgage
It is important to organise your mortgage as soon as you think you have
found a suitable property (before that, we can get an Approval In Principle,
which means that you can reduce the time required once you have found
a property). The loan may take a few weeks to process, and the person
you are buying from and the estate agent will want to know your mortgage
lender is all set to go.
The amount you will be able to borrow is primarily determined by your
income, your employment status, the size of deposit you can provide and
what financial commitments you have.
The next step is to look for the mortgage that most suits your needs.
Some of
the factors you might want to consider in
weighing up different loans are:
- Does the mortgage guarantee a fixed rate of interest (and hence monthly
payment) for the first few years? This can be a help during the early years,
when your finances may be stretched. But look out for early redemption penalties
which can make it costly to change lender (if you use our Mortgage wizards, the
redemption penalties for early termination are clearly laid out so that you can
decide for yourself);
- Will the loan let you take payment holidays if you should find the repayments
become a strain at certain times of year? Flexible loans which offer this facility
can be helpful for people whose income fluctuates from one month to the next
(there is an option in the Mortgage wizard that allows you to select flexible
products);
- Does the mortgage offer you a "cashback" lump sum at the outset?
Loans like this can help you pay for furniture, carpets and all the other things
you will need in your new home (again, you can select cashback mortgages explicitly);
- Check the redemption penalties of any loan you are considering and make
sure you are comfortable with them. Pay particular attention for repayment penalties
beyond the term of the special deal. Many loans allow you to make penalty-free
part repayments, typically up to 10% per annum, and therefore you may well find
that accepting redemption penalties in exchange for a better interest rate is
a worthwhile trade-off, even when you want the ability to make overpayments.
- Will the loan still be affordable when any fixed-rate or discounted period
is over? When special offer periods like this come to an end, most mortgages
move to the lender's standard variable rate, which may be significantly higher.
Once you have chosen and applied for a mortgage the lender will want
some supporting documentation. The information your lender may require
includes:
- Evidence of your income and commitments, such as recent pay slips, a
P60, your latest mortgage statement, and your bank statements;
- Information from credit reference agencies, your employers, other lenders
and your landlord;
- Proof of identity, such as a passport or birth certificate;
Finding a Solicitor
As a first-time buyer, you will not have to worry about selling a property
before you can move. But you will still need to find an experienced solicitor
to carry out the conveyancing on the property you want to buy. Most lenders
will be prepared to accept your choice of solicitor, as most experienced
solicitors will have acted for the lender in question before. If you
apply through our site, if you want us to, we can help you find a solicitor
from a selection of reputable firms – all of whom are able to work
with you over the Internet, by phone or by post as you prefer.
Conveyancing may well take longer than you had imagined, but don't be
tempted to rush matters. Your house or flat is probably the most expensive
thing you will ever buy, so it is important to be sure there are no loose
ends.
When a solicitor conveyances your new property, his job breaks down into
the following tasks:
- Obtaining the deeds which prove it legally belongs to the person you
are buying from;
- Researching just where the property's legal boundaries lie and passing
this information on to you;
- Preparing a fixtures, fittings and contents list which makes it clear
whether or not things like carpets or kitchen appliances are included in the
purchase price. This enquiry form will also ask the vendor whether they are aware
of any material structural or other defects to the property that you should know
about;
- Advising you on a draft contract for sale, prepared by the seller's solicitor,
setting out the terms of your purchase;
- Carrying out a search of local planning information to uncover details
of any upcoming developments, such as a new road, which could affect the property's
value;
- Agreeing a date for completing which suits both you and the property's
seller.
Making an Offer
Once you have found a property you would like to buy, the next step is
to make an offer, normally through the estate agent. Most sellers build
a certain amount of leeway into their price, so it is usual to offer
less than the seller is asking. In deciding what you are prepared to
pay, bear in mind things like the property's state of repair and how
much you would have to spend on building work or redecoration.
Your first offer might be up to 10% below the asking price. It is then
up to the seller to either accept that price, or try to negotiate a higher
one. If there are several potential buyers interested in that particular
property, the vendor may have enough bargaining power to insist that
his full asking price is met. Indeed, in a strong market a property may
sell for a price in excess of the asking price. If you know that many
people will be interested in the property (because there is a lack of
good properties of that type on the market), and you are very keen on
it, you might consider offering the asking price up front to avoid a “bidding” war.
Once your offer has been accepted, the estate agent will confirm this
in writing. You can then go ahead with arranging a survey and finalising
your mortgage arrangements. The acceptance of your offer is not legally
binding until you and the seller exchange contracts which, in a time
of rising house prices, can create the temptation for the seller to abandon
you if a higher offer comes along. This process, known as gazumping,
is more common in England and Wales than it is in Scotland.
Being gazumped could leave you out of pocket on expenses like legal costs
and the survey fee, but that is unfortunately a risk you have to take.
The sale is secured by law only when contracts have been signed and exchanged.
Conducting
a Survey
Once your offer has been accepted, a survey is required to assess the
property's condition and value. Your mortgage lender will require at
least a basic valuation before allowing your loan to go ahead.
There are two kinds of surveyor's report beyond the basic valuation:
1) A Home Buyer's Report comments on the condition of only those parts
of the property which are easily accessible or visible. The surveyor
will recommend any further investigations he thinks are necessary – for
example if he thinks the wiring needs checking or there is the possibility
of some structural problems.
2) A Full Structural Survey involves a more extensive investigation.
A full survey is more expensive than a house buyer's report, but should
tell you much more about any work that may need doing on the property
if you buy it. Full surveys are recommended in many cases, particularly
if you are buying a property that is more than 100 years old or the building
is more than three stories high.
When you view the property yourself, look out for any signs of problems
like cracks or damp patches so you can point these out to the surveyor
later for him to inspect properly.
When you set out on the home-buying process, you should budget for the
cost of more than one survey. You might find the surveyor's report on
your first property uncovers serious faults (such as subsidence or rot)
which mean you want to withdraw your offer. Even if there are no problems
with the property itself, another bidder could step in with a better
offer at the last minute.
Either way, you will have to start the whole process again, and that
includes organising a survey for the next property where your offer is
accepted.
Where the survey does reveal serious problems, you are free to withdraw
your offer. If the problems can be fixed, you may be able to use the
survey results to negotiate a reduction in the sale price to compensate
you for this extra expense.
Exchanging Contracts
With your survey safely completed and the lender happy with it, you can
move to the stage of getting a formal mortgage offer from your chosen
lender which will detail all the conditions of the loan. Read this carefully
and get your solicitor or our Customer Service Adviser to explain anything
you do not understand.
By this time, your solicitor should have a draft contract ready for you
and the seller to sign. Once you have signed this contract, there is
no going back, so be very sure you are happy with all the sale arrangements
before you commit yourself. Typically at exchange (unless exchange and
completion are on the same day), you will have to put down a deposit
of 5% or 10% of the purchase price. You also need to make sure that the
building is insured as you are now legally obliged to buy it (your solicitor
will help make sure that this happens).
Check that:
- Your solicitor has completed all the local searches;
- The surveyor's report is complete and accepted by all concerned;
- You have a formal mortgage offer in writing which you have read and understood;
- You have agreed a firm completion date for the sale, and this date is
noted in the contract;
- There are no outstanding issues remaining to be settled between you and
the seller. If, for example, there is any doubt whether or not the property's
existing carpets are to be included in the sale price, get the matter sorted
out in writing before you sign the contract.
When you have signed the contract, your solicitor will deliver it to
the seller's solicitor in exchange for the contract the seller has signed.
From this point onward, both you and the seller are legally committed
to the deal.
Completing
and Moving In
All that remains after exchanging contracts is to pay over the money
needed to buy the property, less any deposit already paid at exchange,
on the agreed date. Your solicitor will get the mortgage funds direct
from the lender and the remainder (if any) from you, and then pass it
all on to the seller's solicitor. Once payment has been confirmed, you
can collect the keys to your new home from the estate agent.
As soon as you know your completion date, book a removal firm if you
need one and make sure they are prepared to provide the level of service
you want.
Allow yourself plenty of time to sort out all your things before the
removal men arrive. Decide what is going where in your new home and label
each container with its contents and the room where you want it to go.
Remember to pack important items - such as the kettle - where you will
be able to find them quickly and easily.
In the last week or two before the move, contact the companies that supply
your gas, electricity water and telephone services to let them know you
are moving out (if you are currently renting or own a property). Ask
them to arrange for the meters in your old home to be read so that you
do not end up paying for services the next occupant uses. You may also
want to ask the Post Office to redirect your mail for a while. You will
also need to let the Council know you are moving so that you are not
liable for Council Tax payments at your old address.
Co-ordinate with the estate agent and the vendor to make sure that the
meters are also read at your new home.
Once you move in, ensure that you carefully file away all the important
information you have gathered (i.e. addresses and contact details for
the utilities and the Council, the original estate agent's particulars
for the property and your mortgage details). They will come in handy
should you ever decide to go through the whole process again!
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