Embarking on your first home purchase can be an overwhelming experience, with a complex process that might leave you feeling bewildered. This guide will equip you with the vital knowledge needed for securing your initial mortgage and acquiring property, ensuring that you are confidently prepared for this significant milestone.
In this guide
1. Work out your budget
Determining your buying budget might not spark immediate excitement, but it stands as the essential initial step for first-time homebuyers gearing up to find their inaugural residence. Using a mortgage calculator offers a straightforward method to gauge how much you can borrow based on your household income and deposit savings.
As a rule of thumb, most mortgage lenders typically permit borrowing between 4 to 4.5 times your household income, coupled with a requirement for a minimum house deposit ranging from 5-10%.
However, with soaring property prices, securing the necessary amount through a standard mortgage might pose challenges. The positive aspect, though, is the existence of avenues to secure a larger mortgage or bolster your deposit size. Seeking guidance from a proficient mortgage broker at this stage can be incredibly beneficial, especially if they specialise in affordability matters, similar to our expertise. They can assist in devising strategies to potentially expand your buying budget, making it easier to attain your desired home or swiftly enter the property market.
Apart from assessing borrowing capacity, it’s crucial to calculate the additional charges and expenses linked with relocating. Here, we’ve outlined the primary costs you should expect:
Key costs of buying your first home:
Relocation Services – You have the option to handle the move independently by renting a van. However, should you choose to enlist a company’s services, expect costs ranging from £250 to £600.
Stamp Duty Land Tax (SDLT) – As a first-time buyer, you’ll be exempt from stamp duty on a residential property valued below £425,000. For any amount exceeding £425,000 up to £925,000, a 5% stamp duty land tax applies. This payment must be settled within 14 days of property completion.
Home Insurance – Lenders mandate the necessity of having home insurance in place upon property exchange. This insurance shields your new home against risks such as fire, flooding, subsidence, and other unforeseen circumstances. Additionally, consider contents insurance to safeguard your belongings.
Life Insurance & Income Protection – While not compulsory, it’s highly advisable to consider life insurance and income protection. Critical Illness cover provides protection against around 80 serious illnesses, such as cancer or stroke. Income protection offers support if you’re unable to work due to illness or unemployment, while life insurance could settle your debt if you pass away before fully repaying the mortgage.
2. Get a Mortgage In Principle
Now that you’ve gained a clear understanding of your affordability, the subsequent step is to obtain a Mortgage in Principle. This is a straightforward document issued by a mortgage advisor or lender, confirming the borrowing amount based on the information you’ve provided. Usually, this document can be acquired and remains valid for approximately 12 weeks.
Securing a mortgage in principle offers the advantage of demonstrating to sellers and estate agents your commitment as a buyer, as well as showcasing your financial readiness. Some estate agents might refrain from arranging viewings for highly sought-after properties unless you can demonstrate affordability. Therefore, the Mortgage in Principle serves as an ideal document to present, securing an opportunity to view the property.
3. Begin house hunting
Now begins the exciting phase – the initiation of planning house viewings and exploring various properties! Introduce yourself to estate agents in your preferred locality, laying the groundwork for embarking on these viewings. When attending these sessions, allocate sufficient time – around 20-30 minutes should be adequate. This timeframe allows for a comprehensive inspection of both the interior and exterior of the property, enabling you to address any queries that may arise. If a specific property captures your interest, aim to visit it twice before moving to the offer stage. During the second visit, details that may have escaped your attention initially might become apparent.
Remember to familiarise yourself with the areas under consideration by visiting local pubs, restaurants, and high streets. This exploration provides a deeper understanding of the neighbourhood ambiance, assisting in your decision-making process.
4. Make an offer
You’ve discovered your perfect home. With a Mortgage in Principle, you’re confident in affording it. Already picturing yourself relaxing on the sofa, you’re ready to make an offer!
Use online platforms like Rightmove and Zoopla to assess property prices. These platforms offer a price checker feature, allowing a review of past sale prices for any property. It’s wise to examine recent sales on the same street to ensure your offer aligns with current market rates.
When well-prepared, communicate your offer to the estate agent verbally and in written form to avoid misunderstandings. Highlight key aspects such as being a first-time buyer or having no property chain. Such details make you particularly appealing to sellers seeking to avoid lengthy chains and potential delays. Consider including a brief personal introduction in your email, offering insights into who you are and what attracts you to the property, giving a personal touch to your offer.
Be ready for negotiations with the estate agent, clearly stating your maximum budget based on affordability and recent local property sales.
Once your offer is accepted, promptly ask the estate agent to remove the property from the market. This proactive step reduces the risk of another buyer coming in.
5. Apply for a mortgage
It’s time to get in touch with your mortgage broker and inform them about the acceptance of your offer! They will use the information you’ve previously provided to start an application with a lender on your behalf. If there are any changes in your circumstances, like a salary increase or a missed credit card payment by your partner, it’s crucial to disclose these changes promptly. The lender conducts a thorough evaluation of your credit history, expenses, and income, highlighting any discrepancies that may arise.
The application process itself usually moves quickly, as your mortgage broker should have gathered all necessary information earlier in the mortgage process. However, you might need to provide updated bank statements and payslips, especially if a considerable amount of time has passed since the initial information submission.
6. Instruct your solicitors
If you haven’t selected a conveyancer or solicitor yet, your first step is to find a suitable company or individual to handle the legal aspects. While your estate agent and mortgage broker might provide recommendations, it’s wise to compare quotes from various sources to ensure fair pricing.
Once you’ve chosen a solicitor, they will send you a contract outlining their fees. After that, your solicitor will officially introduce themselves to the seller’s solicitor and confirm that they’re representing you. At this stage, they usually receive the property’s title and a preliminary contract.
7. Receive a mortgage offer
Typically, it takes about four to six weeks to obtain a formal mortgage offer from your lender. However, this timeline can vary depending on how promptly you respond to inquiries and the workload of the lender. During this period, the lender will arrange a property valuation to confirm that the purchase price matches the broader market value.
8. Survey the property
Regardless of whether you’re a first-time buyer or an experienced homeowner, a survey stands as the most reliable method to verify the structural integrity of the property you plan to purchase. While there are various types of surveys available, their core aim remains consistent: to conduct a professional assessment of the property’s condition, highlighting potential issues that might affect a prospective buyer.
A qualified surveyor performs the survey, and the information they provide is crucial for your decision-making process regarding the purchase. This evaluation helps determine whether to proceed with the acquisition or offers essential context should you choose to negotiate the price.
It’s worth noting that a survey isn’t obligatory, but we highly recommend opting for one. If you decide to proceed, ensure the surveyor you hire is a member of either RICS (Royal Institution of Chartered Surveyors) or RPSA (Residential Property Surveyors Association), the two primary accrediting bodies.
If any issues surface during the survey, it’s common to renegotiate the house price at this stage. Your offer to purchase the property remains Subject to Contract (STC) at this point, allowing you the flexibility to reconsider your decision.
Through your solicitors, you can share the survey results with the seller. It’s also advisable to provide an estimated repair cost from a tradesman or surveyor.
9. Searches and investigations
At this point, your solicitor begins a series of searches and inquiries. They start by examining the title at the Land Registry, which mainly includes documents detailing land boundaries, restrictions, access ways, and other legal specifics.
Residential searches are usually more time-consuming and typically cover various aspects such as a local authority search, water and drainage search, environmental search, planning search, and flooding search. While most of these searches involve accessing electronic records and can be relatively swift, the duration of a local authority search can vary significantly, ranging from 3 days to 8 weeks, depending on the council’s lead-time.
Moreover, your solicitor will ‘raise enquiries’—essentially asking questions—with the seller’s solicitors. Legally, the seller is obligated to provide comprehensive and truthful responses. This phase may involve some exchange of communication, all managed between the solicitors. It offers you the chance to address any outstanding queries concerning the property, potential neighbours, or any concerns arising from the searches. Don’t hesitate to raise any issues or questions you may have during this process.
10. Get house insurance
Now is the time to reach out to insurance providers for your house insurance. If you have a mortgage, the lender will require insurance from the moment you exchange contracts. Hence, it’s wise to allocate some time beforehand to explore different options. Our home cover offers crucial protection in unforeseen events like flooding, fires, or natural disasters. It’s an essential aspect that should not be overlooked!
11. Transfer your deposit
This stage might seem a bit daunting, but it’s incredibly important! It’s time to transfer your house deposit to your solicitors. They will securely hold these funds until the completion of the transaction.
12. Exchange contracts
The exchange of contracts marks a crucial stage where specific important steps must be completed:
- Both you and the seller have signed the contract.
- An agreed-upon completion date has been set.
- Your deposit has been transferred to your solicitor.
- Both you and the seller have given final authority to your solicitors to proceed with the exchange.
After these actions, your solicitors will carry out the exchange of contracts and manage essential tasks behind the scenes to ensure financial readiness for the seller’s solicitors. This includes requesting funds from the lender and calculating the final balance from you, covering expenses like stamp duty and legal fees. It’s worth noting that some solicitors might request the transfer of these additional fees simultaneously with the deposit transfer.
13. Completion!
The more challenging aspects are now behind you, and this stage surprisingly unfolds quite straightforwardly. Your solicitor will transfer your deposit and the funds from the lender to the seller’s solicitors via a bank transfer. Upon receiving the funds, the seller’s solicitor will contact your solicitors to confirm the transaction (yes, their team contacts your team) and authorise the estate agent (or seller) to hand over the keys to you!
Afterward, the next task involves packing up and moving with the help of a moving van. The property is now officially yours!
14. Register change of ownership
The final steps are within reach – rest assured, you’re almost there. Your solicitor will proceed to register the property transfer at the Land Registry. This process may take a few months to complete. Once finalised, your solicitors will provide you with a copy of the registration confirmation.
15. Take out income protection or life insurance
If you haven’t already considered it, now is an ideal moment to consult with your mortgage advisor or conduct research on mortgage protection and life insurance. Though contemplating worst-case scenarios may be unpleasant, being prepared is crucial.
Income protection comes in various forms but essentially covers some or all of your repayments if you’re unable to work. Life insurance provides a cash lump sum in the event of your passing. If you were still repaying the mortgage, this insurance could alleviate the remaining debt burden, especially if you purchased the property with a partner. This also holds true for an Income Boost mortgage if the buyer or Booster passes away.
Considering these matters may not be easy, but advisors are equipped to assist you in thinking pragmatically about them, offering peace of mind for the years ahead.
And with that, the process concludes! Now, it’s time to relish your home for many years to come.
What is a Mortgage in Principle (MIP), and why is it important?
A Mortgage in Principle (MIP) is a preliminary agreement from a lender stating the maximum amount they could lend you based on initial information. It's essential as it demonstrates to sellers that you're a serious buyer and gives you a clearer idea of your budget before house hunting.
What types of surveys are available, and which one is suitable for my property?
Various surveys exist, ranging from basic condition reports to comprehensive building surveys. The type needed depends on the property's age, condition, and your preferences. Discuss with a surveyor to determine the most appropriate one for your situation.
What are the essential documents needed when applying for a mortgage?
Essential documents include proof of identity, address history, income proof (such as payslips or tax documents), bank statements, details of existing debts, and information about the property being purchased.
How long does the conveyancing process typically take, from offer acceptance to completion?
The conveyancing process usually takes around 8-12 weeks from offer acceptance to completion. However, this timeline can vary based on factors like property chain complexity, searches, and legalities.
Conclusion
In conclusion, the home buying journey involves various steps, from initial considerations to finalising legalities. By navigating through surveys, negotiations, legal processes, and securing necessary insurance, you’ve now arrived at the rewarding phase of enjoying your new home for years to come.
