Buying a home is a huge financial commitment and can be daunting – especially if you’re a first-time buyer.
The process is often a complex and lengthy one but if you break it down into stages, things aren't as scary as they seem.
If you can get your head around the basics of how it works, your home-buying experience will undoubtedly be easier and you are less likely to be taken by surprise along the way!
Here is our 10 step guide to buying a home.
1. Save Up
Saving up a big enough deposit is often people’s main focus.
You’ll usually need to build up a deposit of at least 5% of the price of the property you want to buy.
Generally speaking though the bigger the deposit, the better the mortgage deals you will be able to access so it is beneficial to save more than 5% if you can.
However, it is not just the deposit you will need to save for. There are many other costs that need to be considered such as:
- • Mortgage Fees
- • Stamp Duty
- • Surveyor’s Fees
- • Legal Fees
- • Moving Costs
It is important that you budget for all these things as the last thing you need is to misjudge how much it will cost and end up with unexpected bills.
2. Find Out How Much You Can Borrow
The amount a mortgage provider will lend you will depend on the size of your deposit, your income and your credit score.
If you want advice on finding a mortgage, the first step is to talk to a mortgage broker.
A mortgage broker will be able to advise you on how much you’re likely to be able to borrow and how feasible your case is.
It is important you appoint a mortgage advisor who you can relate with.
This person must understand the specific nature of your work, navigate through the pitfalls, assess your requirements and ultimately find the best mortgage for you.
3. Get a Decision in Principle
A decision in principle (DIP), also known as an agreement in principle (AIP), is confirmation from a mortgage lender that they would, in principle, be willing to lend you a certain amount.
Having a DIP can make you a more attractive buyer as it shows the seller and their estate agent that you will be able to secure the amount of money you need to buy the property.
The lender will carry out a basic credit search on you to ensure you are a suitable candidate.
A lot of lenders do a 'hard search' which means a footprint is left on your credit report.
This in turn can be detrimental to future applications, especially if you have too many footprints within a short space of time.
This is another reason why it is so important to seek advice from a qualified mortgage advisor prior to beginning your application process.
4. Put in an Offer
Once you have researched your chosen area you will be in a position to start viewing properties.
When you find a property you like, it is worth viewing it more than once.
Once you’ve found a home you want to buy, the next step is to make an offer, usually through an estate agent.
When you make an offer you should make it clear that it is:
- • Subject to contract (STC) – the final sale takes place only when lawyers have exchanged legally binding documents
- • Subject to survey – this allows for the cost of any faults or issues to be taken into account once your surveyor has checked the property out
Once your offer has been accepted, make sure the estate agent has taken the property off the market and is no longer advertising it for viewings.
If someone else is interested and views it, you risk someone else coming in with a higher offer, which is known as gazumping.
5. Complete a Full Mortgage Application
Once you have had an offer accepted the next step is to convert your DIP into a full mortgage application.
This is where the lender makes sure they are happy to lend to you.
They will check the information you have given them is accurate by asking for evidence such as payslips.
They will also want to make sure that they are happy to lend on your chosen property.
The property is the lender's security for the loan.
If you don't pay your mortgage, it can repossess it and sell it to get the money back.
The lender will want to be confident that the property is fit for this purpose.
This is why part of the application process involves an independent valuer assessing the property and reporting back to the lender.
Once the valuation has been approved, the lender will produce an offer.
If you are using a mortgage broker they will take care of the complete mortgage application process for you.
6. Organise a Property Survey
The mortgage valuation is not a survey covering the condition of the property you are about to buy, so it is a worthwhile exercise for you to appoint a building surveyor at this stage.
They can conduct a more thorough inspection of the property.
A survey acts as a checking mechanism and will ensure you are aware of any major problems or defects within the structure of the building.
7. Find a Conveyancer/Property Solicitor
A solicitor or conveyancer is required to carry out all the legal and administrative work associated with transferring the ownership of land or buildings from one person to another.
Their duties include the following:
- • Conducting searches
- • Liaising with the seller’s conveyancer, their estate agent and your mortgage lender
- • Checking the documents provided by the seller, including the lease if you’re buying a leasehold property
- • Drawing up and checking contracts
- • Dealing with the Land Registry
- • Paying any stamp duty owed
- • Transferring money from you to the seller
8. Arrange Home Insurance
It’s vital that you have buildings insurance in place on your new home from the day you exchange contracts.
Most mortgage providers will make this a condition of lending.
You are legally bound to buy the property from the moment contracts are exchanged, so if the building were to be flooded or burn down before the day of completion and you weren’t insured, you wouldn’t be covered.
If you’re buying a new-build property, the insurance doesn’t need to come into effect until the day of completion.
9. Exchange of Contracts
The exchange of contracts happens when the buyer and seller’s legal representatives swap signed contracts, and the buyer pays the deposit.
Once contracts are exchanged you are legally obligated to purchase the property.
The deposit is paid and your solicitor will finalise all mortgage arrangements.
This is preceded by the payment of land registry fees and stamp duty.
Before the exchange of contracts, you will need to have agreed a completion date.
Knowing this date in advance means that you are able to research removal companies and make sure you have one booked for completion day.
The completion date, put simply, is moving day.
It’s the date on which the funds will be transferred and the purchase will be complete.
The seller must vacate the property and the buyer will get the keys and can move in.
Completion often takes place 1-2 weeks after exchange, although this is flexible and you can agree a convenient date with the seller.
The process of buying a house can seem confusing and slightly overwhelming, but if you follow each of these steps you will find it much easier.
If you would like to discuss your mortgage options get in touch with us to arrange a consultation.
Liked this article? Try reading:
What Types of Insurance Should I Get For a Mortgage?
Disclaimer: Mortgages for Yacht Crew does not provide advice in relation to savings and investments. This article is intended for discussion only and does not propose financial advice in any way, and therefore should not be construed as such. Your property may be repossessed if you do not keep up with mortgage repayments.